Last Updated on Feb 28, 2020 by James W


According to the debt clock on the Australian Securities and Investment commission website; as of 9:34 am on 15 January 2013, Australians owed almost 37 billion dollars in credit card debt.  The average consumer owed over $4700.  This is a staggering amount of debt; not to mention their other obligations like mortgages and car payments.  With this dire financial situation throughout the country; many citizens are looking for ways to reduce if not eliminate their current obligations to their creditors.  One of the most popular tools for this job is obtaining a debt consolidation loan.

Pros of Debt Consolidation

One of the major features of a debt consolidation loan is the reduction in monthly payment amounts.  For example, if your had 7 creditors that you were paying a total of $1500 dollars monthly and you were to attain a debt consolidation loan that paid off all the creditors and now charges you a monthly payment of $750; you have cut down your debt payments by 50%.  For most people this is all they need to know to seek out a debt consolidation.

Another great reason for consolidating your debts is to rid yourself of high interest credit cards and installment loans.  This is also a more manageable solution.  By only paying out one payment a month, you can easily ensure your repayment is made on time.  Your revolving debt has now been replaced with an installment loan with a start and end date.  With this information, you can begin planning your future financial goals based additional available income and debt consolidation repayment end date.

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Cons of Debt Consolidation

Unless you change your behavior; your problems will continue to recur.  Many people pay off their debts under a debt consolidation only to run up their credit cards all over again.  Now they are making payments on both.  This quick fix doesn’t teach the consumer financial responsibility which makes it helpful but dangerous to their overall financial picture.  Another concern is depending on how bad your credit rating is; the interest rate for the debt consolidation could be extremely high.

This means that in the end; you could be paying more than you would have paid if you just accelerated your current debt repayments.  Lastly, proceed with caution.  There may be additional fees added on to the loan which can end up costing more money.  Make sure you read and understand the fine print of the consolidation contract.

Debt consolidations can be a great way to get your debt under control, but you must ensure you understand the pros and cons.  Make sure you are ready to change your financial behavior so that you don’t get into additional trouble with creditors.  Review the documents and make sure you are getting the best deal.  If you are able to save hundreds of dollars a month in payments, start putting that money to work for you in a savings account.

Used the right way; the debt consolidation can free up some of your funds and give you some breathing room. If used the wrong way, it can do more harm than good.  Review your options and choose wisely.  Make a decision that helps you and your family move toward a simple living and financial independence not more of the same.

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Author Bio:

Rich is a personal finance blogger from Sydney, Australia. While a lot of the content written may be specific to Australia, the lessons or tips within these articles are financially relevant to all.





Founder and chief editor of Blogger, Affiliate Marketer, Tech and SEO geek. Started this blog in 2011 to help others learn how to work from home, make money online or anything related to business and finances. You can contact me at

1 Comment

  1. Great post! There are always pros and cons to everything. Everyone who is thinking about doing debt consolidation, needs to list their pros and cons. What will work for some people may not for others.

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