Benefits of Debt Consolidation
Debt Consolidation has three main benefits. The first benefit is reduced interest rate. When you negotiate and settle with a creditor, the creditor typically will accept a lower amount balance than what is owed. The second benefit is no bad credit. When a debtor continues making payments to his/her/its creditors, the creditor does not report any late payments or defaults to the credit bureaus. The third benefit is no litigation. A creditor has no cause of action to sue if you are making payment pursuant to an agreement.
Negative Effects of Debt Consolidation
Debt Consolidation has two negative effects. The first is no reduced debt balance. During the debt consolidation process, the debt amounts remains the same. The only thing that is different is the interest rate for all the debts. The second is potentially more interest paid over time. The accrued interest may be greater over the term of the process because interest is charged based on the total debt amount and the length of the payment plan may be over several years.
If you want to learn more about debt consolidation, please contact our office for a free consultation 949.591.8755