consolidation means obtaining a loan to consolidate other debts.
In a typical debt consolidation, your high interest rate debt is consolidated
into a larger loan, at a lower interest rate.
consolidation loans are most often used to consolidate high interest rate debts,
like credit cards, into a lower rate loan.
if you owe $18,000 on four credit cards, you could go to the bank and get a debt
consolidation loan for $18,000 so you can pay off all of your credit cards.
This is called a credit
card debt consolidation.
There are two big advantages to getting a debt consolidation loan.
First, you now only have one monthly payment, instead
of payments on more than one credit card, so it's easier to manage your budget.
Second, loans normally carry a lower interest rate than credit cards, so the consolidation
of your debt reduces the interest rates you are paying, allowing you to repay
your debts faster.
consolidation loan is a great way to consolidate
your debt into one monthly payment, but it only makes sense if you can afford
to make the payments. Going from four payments of $200 each to one payment of
$600 each may sound like a good idea, but if you can't afford the $600 payment,
a debt consolidation loan may not be the correct answer.
You should beware
of a Debt
Consolidator who promises a deal that seems to good to be true, because it
probably is. Some Debt
Consolidation Programs are legitimate, but again, be careful that you do not
enter into a plan that you can't afford.
The worst offenders tend to be
Credit Debt Consolidation lenders that promise you a loan, even though you
have bad credit, charge you an upfront fee, and then tell you that you have been
declined. They keep your fee, and you don't get your loan.
If you have the
ability to repay, a debt consolidation loan is a good idea, as long as
you have reviewed your budget and know that you can make the payments.
For more information, search our site or the web: