Pros and Cons of Consolidating Your Debts

You are on the verge of falling into bankruptcy because of the amount of debt you have on several accounts, and you can’t help but notice all those ads about debt consolidation from a direct lender in your area. However, you’re not sure whether it’s a good idea, so now you’re here reading this article after hours of research to see if debt consolidation is the right decision to make. 

Generally, debt consolidation is a good move for anyone with a good credit score because, with it, you’ll be more likely to be approved for loans with low-interest rates and reasonable repayment terms. 

Suppose you’re wondering if you can use any loan to consolidate your debt. Yes, you can. 

You can take advantage of this by choosing a loan that has a manageable interest rate and repayment terms to get out of debt quickly. Consolidating debt is an optimal decision for people with good credit scores.

What is Debt Consolidation?

Debt consolidation is the process of merging all your debts into a single account. This makes it easier to repay since you only have to deal with a single interest rate and repayment term. People with several outstanding balances often consolidate their debts into a single account to make monthly installments much easier to manage and get out of debt quickly.

This is even better if you have an excellent credit score trend because you can take out a loan with a much lower interest rate and better repayment terms to reduce their monthly payments and get their balances repaid faster. With a lower interest rate and competitive repayment terms in a single account, repaying your debt would be easier to handle and with less stress involved.

Here are the pros of consolidating your debts.

Get Out of Debt Faster

Having all of your outstanding balances paid off is very satisfying and relieving. This makes you yearn to repay all of your debts as fast as you can. However, with the number of interests you have to pay off from your several accounts, it can take up to a few years of repayment. Not only that, credit card balances tend to not have any deadlines to be paid off, which might be a relieving thought, but in reality, it can easily slip off your mind.

With debt consolidation, not only will you pay it monthly, but it would also help you get out of debt faster. Not only that, repaying all your debts sooner means that you will have to pay less interest overall.

Lower Interest Rate

As mentioned earlier, debt consolidation is the right decision for those who have an excellent credit score. With a good credit score, you can have more room to negotiate with your lenders regarding your interest rate. This would make your chances of a much lower interest better than when you have a poor credit score.

This is even better if you use a personal loan as a consolidation loan. Personal loans typically have good repayment terms and low-interest rates. And with a good credit score, you can even make it lower than your lender’s initially offered.

Credit Score Improvement

At first, by doing a debt consolidation, your credit score will take a hit because you’ll be going through a credit inquiry. However, over time, your credit score will improve since you will be able to pay off your debts sooner, along with lowering your credit utilization ratio.

Cons of Debt Consolidation

Here are the cons of consolidating your debt:

Tempts You to Put New Charges on Your Credit Cards

After having your credit cards paid off by consolidating them, it can entice people to put new charges on them. With the world’s state right now, quick loans online are on the hype due to their availability and safety. As a result, it would be much more tempting because consolidating your debt again would be accessible. If one chooses to do so, it will add more debt, which will make your consolidating loan harder to pay off if it’s still not fully paid off.

Possibility of Not Having a Low-Interest Rate on Your Consolidating Loan

When choosing a consolidation loan, make sure that you choose a loan with a low APR. When you choose a low APR loan, repaying it would be less expensive. Choosing a loan with a high APR won’t do much about the payment you will make every month.


While the benefits of debt consolidation mentioned above are a huge relief, they can also cause overconfidence and recklessness. This could lead to prematurely making decisions that might be good on paper but harder to do in practice.


Debt consolidation is the right decision if you know what you are doing, and of course, if you have a good credit score. If you’re still not sure about doing a debt consolidation, you might want to research some more and get the opinions of others who have done it before. But if you’re confident that you can pay the loan off in time, then you should do it.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.