Why Should You Combine?
The main reason for consolidating debt is to make your monthly payments smaller. When financial institutions, such as credit unions and banks, offer consolidated loans, what they offer is to pay off all consumer loans (credit cards, car loans, hospital bills, student loans, etc.) and pile up all the debts into one “consolidated” loan. a single that generally has a fixed interest rate that is much lower than the cumulative financial costs of all smaller loans.
So, if your monthly payments get out of control, if you have decades of residual payments in front of you, and if there is a fixed, lower interest rate that you think qualifies, a consolidated loan might be right for you. But maybe not. Read on:
Although consolidation loans offer smaller monthly payments, you usually agree for years, maybe decades, more than debt. This is how low interest rates can be offered in this consolidation package. Do you want to pay off this debt for another 20 years? How about 30?
And don’t forget: when you consolidate debt, you end up paying more interest because it has extended your payment period an extra decade or more.
Is it really worth it to commit to all of these financial costs just to have a little cash month-to-month, especially if your loan requirements are almost up? Maybe.
The common way many homeowners consolidate their debt is by borrowing against the equity in their home. This type of consolidation plan, though easy, is not without inherent risks. Right now, your debt is unsecured, but if you consolidate everything under a home equity consolidation loan, it becomes safe debt. If you fail to pay for this new consolidated loan, you have a lot of losses.
At least under your current loan, you will not, for example, lose the education you receive thanks to all the financial assistance you get, you should not be able to pay it off. With a home equity consolidation loan, creditors will not hesitate to measure your home if you do not pay.
You have probably seen and heard a lot of interesting consolidated loan ads to set to hand with a bad credit score. If you always think there is a catch to the promotion of this consolidation loan package, you are absolutely right. The initial application fee for this type of consolidation loan is incredible, and it is very likely that you will never see a consolidation loan promised to you.
But not all consolidated loans fit this scenario. You might still be the perfect candidate for a consolidation loan, and there are many legitimate consolidation loan companies out there to help you consolidate properly. If you decide to pursue a loan application for consolidation, you might want to start as soon as possible. Congress and the President both came up with ideas for possible laws to either limit or eliminate the consolidated loan package.
But if you have not been able to consolidate your loan, you have another option, there is no need to lower your monthly payments, but if there is nothing else to help you stay on the path to good credit. Most lenders will now assist you in arranging automatic payments from your checking account. You still have to make sure the money is there to withdraw, but the chances are of course that you will make payments on time and get closer to debt free.