If your business has considerable debt, consolidation may be the answer to your problem. Debt refinancing comes with particular advantages and disadvantages. Understanding what they are will help you decide whether this financial option is right for you.

Debt Consolidation Advantages

Consolidating debt has the potential to make deficits easier to pay down. By having everything in one bill with a fixed payment structure, it becomes clear what must be paid and how much debt remains. The quicker you pay it off, the sooner you can start putting that money toward business concerns or saving for retirement.

Further, debt consolidation cuts down the number of payments you need to make. Instead of writing scores of smaller checks, you can send one larger amount on a regular monthly date. The ability to focus on one payment instead of many is likely to reduce stress and save time.

Concentrating debt also lowers the number of variables that might complicate your situation. Unlike with credit cards and certain loans, your interest rate will remain the same, giving you invaluable peace of mind.

Finally, debt consolidation has the ability to boost your credit score. It may initially harm your rating since your finances will become subject to a hard look. In the long run, though, it’s bound to improve. The odds are better that you will make on-time payments, and that history accounts for a whopping 35% of your overall score.

Debt Consolidation Disadvantages

Bringing debts together might create the illusion that your financial problems are gone, spurring you to assume additional debt. Avoid this circumstance by sticking to a realistic budget. While you’re creating one, be sure to set a chunk of money aside for emergencies.

With debt consolidation, there’s a good possibility that you’re going to be saddled with upfront costs. Beware of loan origination fees, balance transfer fees, annual fees, and closing costs. Late payment or early repayment penalties might also apply. Ask your debt consolidator about these charges so that you don’t receive an unpleasant surprise.

Lastly, consolidating debt can result in paying more, especially if you have less than ideal credit. One reason is that the terms of specific loans may wind up being extended. Your monthly payments toward each creditor may be less, but you’ll wind up paying a higher amount over a longer period of time.

Debt refinancing is often a smart choice. However, the benefits come with serious drawbacks that must be considered. Weigh the positives against the negatives before consolidating your financial obligations.