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So, even if your monthly payment is low, you could actually end up paying more in total interest over the term of the loan.It’s important to check interest rates, fees that may be charged in a loan and the overall cost to borrow the money, before proceeding with a consolidation loan.Debt consolidation loans may offer lower interest rates than credit cards, so they may seem like an attractive option for those with multiple, high-interest debts.When should I consider taking out a debt consolidation loan?Debt management plans can be accessed with the assistance of a credit counseling agency.Debt consolidation loans and debt management plans can help you avoid distressing collection calls from creditors chasing payments. First of all it is important to work out exactly how much you need to pay back and how much you can afford to put aside for repayments each month.Alternatively, as is mentioned above, if you have collateral, such as a home or car, you may be able to get a lower interest rate on your debt consolidation loan by borrowing against those items.Just remember, if you end up in a situation where you cannot pay the debt consolidation loan you may lose the property you used to secure the debt. Debt consolidation loans can be difficult to obtain.
Make sure that you will actually be saving money by consolidating your debts with a loan, by ensuring the first figure is greater than the second.They may also utilize an existing credit card's balance transfer feature (especially if it offers a special promotion on the transaction).Home equity loans or home equity lines of credit (HELOC) are another form of consolidation sought by some people.There are several ways consumers can lump debts into a single payment.One method is to consolidate all their credit card payments into one, new credit card—which can be a good idea if the card charges little or no interest for a period.
If either of the above applies to you, you should consider the advantages and disadvantages of taking out a loan to consolidate your debts. People may find there are benefits that come with consolidating debts into one single loan.