Manage your Debt Today!
Consolidating, or combining, your debt into one loan is a great resource to utilize in your struggle to manage debt. Consolidation often allows a debtor to secure lower fixed interest rates and the convenience of paying one single payment each month. Many debtors choose to consolidate their debt for multiple reasons.
Typically, individuals with credit card debt opt to consolidate their debt because of sky-rocketing interest rates. Interest rates tied to credit cards are often higher than interest rates for unsecured personal loans. Therefore, consolidating debt from credit cards to loans may be beneficial for some individuals.
Additionally, individuals with assets, such as a home or car, may obtain an even lower interest rate by applying for a secured loan to consolidate their debt; secured loans have lower interest rates because the borrower leverages his or her property as collateral in case of late or default payments.
Considering the following before consolidating your debt:
- A useful tool, but not a solution
- Debt consolidation is often helpful in lowering monthly payments, but it is not an overnight solution to debt management.
- Weigh your options
- It is important to keep in mind that although your monthly payments are decreasing, the total amount of loan to be repaid will increase due to the longer payment periods. However, for many, debt consolidation is the best solution because it enables the borrower to meet monthly payments, improve their credit score, and achieve both short-and long-term financial goals.
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- Payment periods
- Consolidating debtresults not only in lower monthly payments, but also in longer payment periods.
- High interest rates
- APR rates associated with debt consolidation are typically lower than most loan rates. Compare rates to ensure you’re getting the lowest APR rates possible.
- Read the fine-print
- Beware of additional fees that may be applied if you delay re-payment