The problem with debt consolidation loans is that they appear to be a debt solution but are in reality a debt substitute. In other words, it simply involves switching all of your separate little debts for one large, bloated debt.
In this way, it gives the illusion that you’ve somehow refurbished your finances, whereas all you’ve really done is shifted your debts around.
Most of the time, debt can be blamed on overspending and under-saving – or rather, poor financial management.
There are many who can’t afford to repay their debts due to accidents, unfortunate incidents and life’s harsh realities. However, those who opt for debt consolidation loans are usually already deeply indebted and mistakenly view them as a financial panacea.
The truth is they are more of a bandage than a salve, as they don’t heal the underlying wound. The fact of the matter is, you simply cannot borrow your way out of debt!
You may have considered increasing your home loan and using this extra money to pay off all of your smaller debts – which is another way of consolidating. From then on, you would only pay one mortgage instalment at a lower interest rate once monthly.
On the other hand, this means you’ll be paying off these little debts for 20 years, instead of 2 to 3 years!
In other words, as you’ll be paying off your smaller debts over a much longer period of time, by the time the 2-decade repayment term is over, you will have spent a lot more on interest in total. Even if you’re paying lower monthly interest rates.
Worst of all, should you suddenly become unable to afford your bond payments, defaulting on these could very well lead to the loss of your home!
Conversely, with debt review, your property and other assets will be protected from credit providers. So you won’t have to deal with the crippling stress of losing your home. Debt counselling is a considerably better option, as opposed to debt consolidation loans, all things considered!
To find out more about NDA’s debt review services, send us your contact details online for a free call back from one of our professional consultants.