Personal Finance Lecturer Dorothy Kelly reveals the pros and cons that borrowers should take into account when considering debt consolidation in a recent WalletHub story titled “Debt Consolidation Loan Offers.”
“The biggest ‘pro’ of debt consolidation is that it offers borrowers a convenient way to pay off several debts with one monthly payment to a single company. Debt consolidation may also allow them to stretch out payments over a longer timeframe, resulting in lower monthly bills,” Kelly says in the story.
Lower payments over a longer period, however, can cost borrowers more dollars in the long run, she adds. “Before deciding to consolidate debt, borrowers should understand how loans are amortized and how APRs and the length of the loan will affect payments as well as their wallets,” she stresses. “Once borrowers understand how amortization and interest rates work, they may decide that the convenience of debt consolidation is not worth the cost.”