This is a million-dollar question.  I feel no one can ever answer this question properly.  It entirely depends on individuals and their moral values.

debt-consolidation-loan

If they are committed to do something good and lead a good/peaceful life, they will make every attempt to use the debt consolidation loan amount efficiently and adequately.  They will also make every effort to repay the loan amount within time.  But finding such individuals is very difficult nowadays.  You find more defaulters then the sincere individuals.  Even though the individuals are sincere, the circumstances make them defaulters sometimes.

Debt consolidation loan will help you to clear your old bills. It gives additional time to arrange funds to clear debt consolidation loan amount.  Definitely, it is meant to solve your problems.  But if you fail to repay the debt consolidation loan amount in spite of getting additional time, then instead of solving your problems, it will be added up.  You are responsible for your deeds.  This is in case of personal debts.But have you ever thought of business debts?

Debt consolidation loan amount helps a business a lot

There are chances of production being stopped due to non-clearance of old bills/salaries/wages.  Once this problem is solved, the production starts leading to increase in work in another department also.  You may incur profits.  But this situation is temporary.  In a business, you can never predict the future 100& accurately.  You may have predicted that you will earn a profit, but due to circumstances related to market (sale of products is less due to the introduction of new products by your competitor/ loss of interest in the product, etc.), you may incur a loss.  In such a situation, this debt consolidation amount itself becomes a big problem for you because you are forced to clear the amount.

How to overcome such a problem?

  • Before consolidating the debts, check whether debts really need to be consolidated or not. If it can be handled without consolidating the debts, your half problem is solved because the more debts you sum up, the more will be the debt consolidation loan amount.
  • Always ensure that you repay the debt consolidation loan amount within time.
  • Check if there any government policies to waive-off the loan amount and see if you meet any of the conditions.
  • Restructure your payment schedule. Paying the expenses on priority will save you from you from a lot of tension.
  • When you are opting for the debt consolidation loan amount, then prepare yourself to clear the loan amount also. So, savings of funds to clear the debt consolidation loan amount is necessary.
  • Never increase your expenses then your income. Whether it is personal debt or business debts, if your expenses increase your income and this happens for continuously 3-4 months, then prepare yourself to face the consequence.  All you have to do is cut of unnecessary expenses.
  • Cultivate the habit of savings.
  • In case of business debts, ensure that your collections are appropriately managed. Also, see that the credit you give to your debtors is also under control.  When your ship is sinking, I don’t see any point in doing social service to others.  Only when you stand, you can support others.  Keep this mantra in mind and act accordingly.
  • Selling off assets to clear the debts is another suitable method of ending the tensions. When you don’t get anyone source, your personal assets such vehicles, land/property, or jewelry will help in solving your problems.  Either these can be kept as a mortgage or directly sold to others to get some amount to settle the dues.  This is not a new concept.  From yesteryears, our forefathers have been using this technique to clear their dues.
  • Debts written off have a twin effect on you. When you do it to your debtors, it is a loss to you, but when a creditor does that in your case, it is a benefit to you.  Well, debts are written off once in a while, and this should not be taken for a granted.  If your creditor feels you are the very bad payer of debts, then the chance of getting support from him is lost
  • When you are not in a position to clear your debt consolidation loan amount also, it is wise you to communicate the same to the creditor and renegotiate the terms with him. Maybe he will allow you some time keep in mind the relationship you have with him.  The creditor may also waive off completely providing relief to you.  But everything depends on the communication you have with them.
  • In case of a small business, if the debts cannot be controlled or repaid even after taking debt consolidation loan, instead of opting any further loan, it is better to sell the business. However, in medium-scale and large-scale businesses, you will have to think before you take any action because the debt consolidation amount will be tremendous even after sale also problems won’t solve.  There are many people whom you are supposed to answer for every action you take.  But in small-scale business, you are not bound to answer to anyone as it is your own proprietorship firm.  You are the whole in charge of whatever action you take.

Debt consolidation in short run is beneficial.  But in the long run, you may have to face a high interest to be paid to your creditor.  This again will be a burden on you apart from the debt consolidation loan amount.  If you are paying only the interest lifelong when will be in a position to clear your principal amount.  This point has to be considered when you are opting for a debt consolidating.

Debt consolidation loan is a facility to repay your own bills.  Whether it’s for personal use or business use, the facility has to be used in a positive and effective way. Always, keep in mind that you need to pay the consolidation loan in time to avoid court hearings.

Author Bio

Isabella Rossellini is a marketing and communication expert. She also serves as content developer with many years of experience. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.