When is the right and wrong time to consolidate debt? Below we’ll look at a couple of the most common reasons to choose or avoid debt consolidation.

You may benefit from debt consolidation if:

Consolidating credit card debts with higher interest rates and fees

Interest and fees are two of the most costly aspects of debt. High rates will mean you pay a larger portion of interest over time; if your loan uses amortising interest, you’ll barely make a dent in your principal loan amount when initially making repayments. High fees also hinder your ability to save money and make additional, extra repayments to reduce the loan amount.

You struggle to manage various payment schedules

If you’ve got several different debts, chances are you’ll have several different payment schedules. This can make meeting your payment obligations difficult, but can also put a strain on other essential payments, such as managing bills, rent, or groceries. Debt consolidation can help streamline both your loan payments and personal budget.

You may want to avoid debt consolidation if:

You lose money by consolidating debt

Like many financial decisions, debt consolidation isn’t suitable for everyone. The main drawback when consolidating debt can be the early exit fees or break fees on multiple loans. If you’ll end up paying more in exit fees than you’ll save by consolidating your debts, it may not be a suitable option.

You have a poor credit rating

Debt consolidation can temporarily impact your credit score, so it’s best to ensure your credit rating is as strong as possible before applying, to ensure you qualify for the best rates and can save the most money when consolidating your debts.