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Should you consider a consolidation loan?

| Apr 3, 2020 | Debt Relief

You know that you can’t stay in debt forever, because the strain that you’re dealing with is becoming overwhelming. You’ve worked hard to get where you are today, but a combination of lost hours at work and large, financed purchases have put your behind on what you owe.

Today, you’re looking into debt-relief options. One in particular, consolidation, seems like a good idea to you, but is it? Before you choose consolidation, consider the pros and cons carefully. Here are a few things that you should know.

1. Consolidation groups your bills into one loan, which may or may not have a lower interest rate

The first thing to look at is the interest rate on a new loan. If it’s significantly lower than your current interest rate average, then the new consolidation may be worth a try.

2. Combining your debts might not lower your payments

Combining your debts might not be enough to lower your payments, but it’s possible. If you can, add up the new loan amount and monthly payments to see how much you’re going to save. There is usually a fee for opening the new loan, too, so you’ll want to consider that when deciding if you’re going to save money with a consolidation loan.

3. Zero-interest loans can be tricky, so pay attention

Finally, if you have found a zero-interest loan, take a minute to make sure you have enough time to pay off what you’ll owe. If you can’t pay the loan off in full by the time the introductory period ends, you’ll end up paying all the interest you could have saved.

These are a few things to consider if you’ve been looking at consolidation loans. They could be a good option, but you must be cautious.