Debt consolidation is a game of opportunity. Consumers who consolidate too early risk saddling themselves with uncompetitive interest rates, while those who consolidate too late will spend drastically more money on interest. Furthermore, there are times when small consolidations are necessary to correct or improve high interest borrowing.

A firm understanding of debt consolidation pros and cons are necessary in deciding if it is the right time for consolidation. Rather than merely listing the factors which impact debt consolidation, this article presents them one factor at a time, pausing to touch on what subfactors should be considered.

Combining such debts as vehicle loans, education loans, and credit cards under one long-term package lowers overall monthly rates significantly. When debt is spread among many sources, borrowers have a tendency to either miss payments or spend far too much time juggling debts and paperwork. As mistakes accumulate, credit scores pay the price, and the debt pile becomes that much more overwhelming.

The relative permanence of debt consolidation loans make it so that it is only lucrative for borrowers with a good or excellent credit score. Though high-risk, high-interest loans can be necessary in cases of true financial emergency, a good or excellent credit score is necessary to secure good interest rates.

When a lending company completes a consolidation loan, they purchase all of a person’s debts and then develop a single payment plan. In addition to lowering monthly payments, this also tends to lower interest rates overall—the company knows that payments will be coming in slowly for a long period of time.

Note that consolidation loans mean that loans will last longer. By reducing monthly payments, debt consolidation loans make debts last longer. As anyone who has paid a final payment on a car or home can attest, there is an immense satisfaction to conquering debt. This is no mere indulgence, either, as paying off debts sooner rather than later frees monthly income for investments more lucrative than merely minimizing interest on borrowed money.