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Pros and cons of debt consolidation
If you are feeling that your debts have climbed too high and you are unable to pay. No matter how hard you try whether getting cash from another card or paying a minimum credit card balance and those things seem do not help you at all. Then debt consolidation may be your solution. What is debt consolidation? Let’s find out.
Debt consolidation is to combine all debts you have whether they are informal or formal debts or other credit card debt then sum up to get a large money loan from an authorized financial institute and let them pay all debts then you pay by an installment plan with a cheaper interest rate. This is a benefit for anyone who intends to end all debt with just one payment. The suited debt for consolidating is the one with high-interest rate debt such as an informal debt. After consolidating all debt, we will get the formal interest rate which is lower.
However, to consolidate all debt, you must comply with all conditions from that personal loan financial institution which is regulated by the Bank of Thailand. The regulation is the bank can provide the maximum loan that does not exceed 5-times of the income for the no-guarantor personal loan. However, no guarantee is given because this is based on a different financial institution consideration. The considering factors are the payment history which has you ever missed any payment, what are your current loans and what is the maximum credit limit. However, good payment history with accurate payment will get a higher chance from the financial institute.
Once we know what debt consolidation is. Let's compare the pros and cons of it.
Pros of debt consolidation
Cons of debt consolidation
In summary, debt consolidation has advantages and disadvantages. If you are experiencing debt problems and it seems increasing and effect to your cash flow. Therefore, debt consolidation may be your option. However, you need to compare the pros and cons then select the best solution for yourself. Anyway, the best way to deal with debt is saving, and do not be extravagant. Moreover, be patient, pay all debts and you have to understand that everything takes time. Do not give up and eventually, all debt will end and you can start a new and better financial you.
Nipapun Poonsateansup CFP®
Independent Finance Planner and Public Speaker