The Finance Blogger


Loan Consolidation

Reducing ExpensesLoan consolidation is one way to reduce the overall amount of interest that you pay and make more money available for you to pay down debt. By consolidating your loans and credit card balances into one payment not only for your total payment you also lower the amount of interest that you pay on your debt. This is a really fantastic when you save money. Most people however are just not facing up to their debt issues or taking action about the problem when they know they should be doing something about it.

Credit card Debt and Loan Consolidation

Most credit cards are at a 20% interest rate or close to it, while store credit cards can be as high as 29%. Car title loans and payday loans can be as much as 300%, although some groups are trying to pass laws to bring them down to a maximum of 36% which is still very high. Either way these are prime candidates for loan consolidation and significantly reducing the amount of interest you pay if you find the correct low interest loan consolidation product.

Loans are much lower and depending on your credit rating and whether you use your home as security you can get interest rates for consolidating your debt as low as two or 3% today. Interest rates are forecasted to rise, however even if they go to 5%, they will still be significantly lower than the high rates for credit cards etc.

Lower Monthly Payments

Another advantage of consolidating your debt in addition to lower interest rates is that you will also have a lower monthly payment. With a high interest rate credit card the interest component of your monthly payment Is a significant amount compared to the value of the monthly payment. A personal loan at two or 3% has a much lower monthly payment relieving some of the stress and pressure on your cash flow.

The extra money can be used for any number of things. Financial advisers will recommend that you take this extra money and use it to pay down your loans even further and reduce your overall cost of borrowing money. If you can repay the loan quickly you will end up with a much better cash flow since you now have a loan payment that is no longer needed.

Other consumers will use the money saved to pay for things they have been delaying for some time simply because their money was so short. This is definitely ok, however we strongly urge consumers not to drive up the balances on their credit cards once again. If you do, now you have the loan consolidation payment as well as the credit card payments to make and this can get pretty difficult. Consolidate your high interest loans with a low interest loan and then cut up those credit cards or put them somewhere you cannot easily get them. You really want to remove the tendency to utilize them.

Try to focus on repaying all of your loans to avoid paying too much interest and consolidate your loans to reduce your overall interest cost and monthly payments.

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