Debt Consolidation - Reasons Why
Almost all financial institutions offering loans offer debt consolidation packages.
Sometimes they may not have packages named as such, but when the actual loan may fit your consolidation requirements.
In the later case, you have to consult with the institution if you can take that loan out for consolidating your overall debt.
There are a couple of very good reasons why you should consolidate your debt, however they do come with some serious caveats you should consider.
First of all, the main reason for debt consolidation is to lower your regular payments, these are usually monthly, although some institutions may require bi-weekly payments on some of their shorter term loans.
This means; if meeting your monthly payments is getting difficult, or even impossible then you should in no doubt consider debt consolidation.
Why should you do so? Defaulting on your debt payments can lead to all sorts complications from bad credit history all the way to property fore-closure.
Even if you don't default on your debt, the stress caused by the burden of meeting steep monthly payments may lead to a miserable private and social life.
To put it simply, consolidating you debt may give you breathing space and leave you with enough funds meet other requirements.
Typically, consolidated loans will offer you lower monthly payments at the cost of having longer payment times.
For example, instead of paying $2000 monthly for the next 8 years you may have to pay $900 per month for the next 20 years.
So, the real choice is paying $192,000 over 8 years or paying $216,000 over 20 years.
In this case you are paying $24,000 more in interest as the cost for convenient monthly payments.
Any other options? Yes, there may be other options but they do not readily come by.
Due to competition among financial institutions it is not unheard of to find a loan offer that doesn't have the effect of a huge overall interest.
In this case, you would have to look out for loans that simply offer better terms than what you currently pay.
They do not have to be billed as "consolidated loans".
You then take out this new loan with better terms.
You have to make all the necessary calculations to make sure you are saving money.
What most people do is they keep considerable savings on hand and are always ready to meet the fees required to switch loans if it is feasible.
Sometimes they may not have packages named as such, but when the actual loan may fit your consolidation requirements.
In the later case, you have to consult with the institution if you can take that loan out for consolidating your overall debt.
There are a couple of very good reasons why you should consolidate your debt, however they do come with some serious caveats you should consider.
First of all, the main reason for debt consolidation is to lower your regular payments, these are usually monthly, although some institutions may require bi-weekly payments on some of their shorter term loans.
This means; if meeting your monthly payments is getting difficult, or even impossible then you should in no doubt consider debt consolidation.
Why should you do so? Defaulting on your debt payments can lead to all sorts complications from bad credit history all the way to property fore-closure.
Even if you don't default on your debt, the stress caused by the burden of meeting steep monthly payments may lead to a miserable private and social life.
To put it simply, consolidating you debt may give you breathing space and leave you with enough funds meet other requirements.
Typically, consolidated loans will offer you lower monthly payments at the cost of having longer payment times.
For example, instead of paying $2000 monthly for the next 8 years you may have to pay $900 per month for the next 20 years.
So, the real choice is paying $192,000 over 8 years or paying $216,000 over 20 years.
In this case you are paying $24,000 more in interest as the cost for convenient monthly payments.
Any other options? Yes, there may be other options but they do not readily come by.
Due to competition among financial institutions it is not unheard of to find a loan offer that doesn't have the effect of a huge overall interest.
In this case, you would have to look out for loans that simply offer better terms than what you currently pay.
They do not have to be billed as "consolidated loans".
You then take out this new loan with better terms.
You have to make all the necessary calculations to make sure you are saving money.
What most people do is they keep considerable savings on hand and are always ready to meet the fees required to switch loans if it is feasible.
Source...