The Finance Blogger


Consolidation of Debt

Consolidation of DebtEvery person and every couple at some point in their lives needs to think about consolidation of debt. This is debt that they owe to other people and companies that is usually relatively in small amounts that they need to bring together into one loan usually at a lower interest rate than all of the other debts that they have.  The usual culprits are credit cards, but sometimes it is a combination of car loans, mortgages, personal loans or credit cards that you may use every day. Consumers usually use credit cards for their every day expenditures and also larger purchases that they may buy from time to time.

Consolidation of Debt – Interest rate on Credit Cards

Credit cards are great tools as long as you can repay them at the end of the month and not trigger any interest charges on any unpaid balances. If you cannot they are going to charge you 18% to 20% on the unpaid balance. This is really were consolidation of debt can pay off and save consumers a lot on money in terms of interest charges. You are still going to have to repay the balance, but while you do you will be charged a lower interest rate after consolidation of your debt.

Combining your credit card debt into one low-interest loan will decrease your monthly payments, lower the interest that you are paying and provide you with some relief in terms of your cash flow. You should be able to focus the extra cash flow on repaying your debt that much more quickly. Some people will remortgage their homes and consolidate their debt into a new mortgage payment at a low-interest rate. Not only do  you save money in terms of the interest that you pay, your payments on a monthly basis are also much lower since they have been amortized over a longer period as well.

Consolidation of Debt – Improve Credit Rating

This is a win win situation for all concerned and many people benefit from consolidation of their debt every day in this manner. It is also interesting to note that taking this step can also improve your credit rating since you have less debt instruments charged to you and your potential  payments are less as well.

Your bank manager or bank loans officer can help you with a consolidation loan, however there are more and more online lenders offering consolidation loans as well. We suggest you be very careful with  these sites and providing a lot of private information until you are sure you are dealing with a reputable site. There are just too many sites that collect personal information and then resell it to be used in creating fraud situations. If you are concerned about this deal with the old brick and mortar banks to obtain your debt consolidation loan. Consolidation of debt should cause your total monthly payments to decline and this step should also mean you pay less actual interest to the credit card companies.

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