Consolidating your debts into a single loan might seem like a simple thing that can make your life easier, but it is not a great idea. Because if you fail to make payments on your debt consolidation loan, you could lose many properties.
- Free debt advice
If you are seriously looking for a consolidation loan, then it means you have difficulties paying your debt. Perhaps you think that your options are limited, but there are many options, more than you can imagine. There are some debt solutions organizations that can advise you on how to clear your loan faster.
- Debt consolidation loan: definition
If you have more than one debt, and you are having difficulties in making repayments, you can incorporate all these loans into a large single loan as a way of reducing your payments. These loans are not unsecured debt. in fact they are secured against properties such as a home. However, there are those who allow unsecured debt repayment, but for little amount.
A consolidation loan allows you to borrow sufficient money to pay off all your debts and then owe the cash to a single lender. Note that debt consolidation loans can be a little bit tricky and may lead to more debts.
Debt consolidation makes sense when your primary aim is to use the money to pay debts and keep up with the current payments.
- When does a debt consolidation loan make sense?
It only makes sense if it helps you pay less interest rate that what you were previously paying.
It only makes sense if the total repayment amount would not increase, and you can still pay the new price.
Nevertheless, you still need to consider risks that come with giving up you house as collateral; things may not change in your favor in the future.
- When does a debt consolidation loan not make sense?
It does not make sense if the interest rate is higher than what you were initially paying. If you cannot afford to pay the new amount and the loan does not clear your debt, then debt consolidation loan does not make sense.
If the monthly repayment is lower, but the credit takes even longer time to clear (meaning the total repayment amount will be very high) then the loan does not make sense.
- Can you transfer your credit card balance?
You can still merge all your debts into what is called “unsecured personal loan.” This way, you will not be putting your house at risk. However, you will need to have a good credit score for you to receive a low-interest rate.
- What if you do not want a secured loan?
Research online to get the best deal. Let not the interest rate be your primary focus. Compare the annual percentage rate because this includes additional costs like for example arrangement fee.