If you choose to consolidate your debts, you will effectively take out a new loan for the purpose of repaying the old ones.In many cases, the interest rate on the new loan is significantly lower than what you were paying previously.Here are some of the downsides associated with consolidating loans.
It’s a Treatment, Not a Cure One of the main drawbacks of debt consolidation is that it’s widely regarded as a temporary solution to a permanent problem.
While debt consolidation can lower your monthly payments and even your interest rates, it doesn’t change the fundamental problem that your business is spending more money than it’s taking in.
Single Creditor One of the primary benefits of debt consolidation is that you only need to deal with one creditor instead of many.
With debt consolidation, an outside company creates a payment plan based on your debts and disperses funds to the various lenders as needed.
And while there’s nothing wrong with seeking financing to grow your business, failing to repay those debts could result in you losing the company you worked so hard to build.
If you’re struggling with low profits and high costs, debt consolidation could be a viable alternative to defaulting on your loans.Although debt consolidation companies often claim to be negotiating better interest rates, some are actually just drawing out the payment period.So while your monthly payment might be lower, you may actually be paying more interest to the lender in the long run.Lower Interest Rate No one wants to pay more than necessary in interest on a loan.One of the benefits of debt consolidation is that you can potentially lower your interest rate for all loans and credit lines.Instantly review the debt consolidation loan offers you qualify for, with no need to ever visit a branch.