Consumers who are attempting to pay off debts through a personal debt consolidation loan may need to consider certain factors before they turned to a particular consolidation loan or opportunity to consolidate debts from various personal sources, as both loans and credit cards have been used over the past months as a way to consolidate consumer debts in the hopes of finding more affordability on monthly payments or overall costs. However, when it comes to using debt consolidation loans or credit card balance transfers, there are not only questions that a borrower should ask, but some advisors feel consolidation altogether should be avoided.
The benefits of a debt consolidation loan are quite apparent as a consumer who may have multiple debts associated with even decent interest rates will obviously be paying higher overall costs in terms of the amount they will meet on principle payments and interest as well. However, these totals are usually quite troubling for particular consumers who may be in a difficult financial position and, when considering the total amount they will pay from month-to-month on a debt consolidation loan, many consumers begin the consolidation process without giving it a second thought. Obviously, avoiding missed payments on debt is important, but looking at repayment options and what a consolidation loan entails will also be vital to keep overall costs at a minimum.
According to an article on Bankrate.com, looking at factors like the interest rate on a debt consolidation loan or credit card balance transfer opportunity, factoring in how much debt a consumer wants to consolidate, and simply reviewing a consumer’s credit score will be necessary before entering into the world of debt consolidation. Obviously, consumers who choose a debt consolidation loan may get an affordable interest rate, but a higher principle amount could cause the repayment timeframe to be longer and this could lead to additional costs even when this low rate is factored in.
Balance transfer credit cards have also been popular over the recent months as many lenders are advertising a 0% interest on these types of cards, which can give a consumer the option of consolidating debt on this particular card and then erasing their debt with no interest charges incurred. While there are some problems that may be associated with balance transfer fees in these cases, this is something that consumers must research as well in order to ensure they are not giving up the benefits of consolidating on a balance transfer card due to fees.
Essentially, consumers who are in a position where they are having trouble meeting monthly payments and fear they will miss one or more debt payments in the future usually consider consulting various, and reputable, financial institutions about debt consolidation options as these cases usually have a consumer in a position where simply finding more affordable monthly payments takes priority over reducing costs related to interest. Yet, consumers who may be able to pay these debt obligations separately could find that if they budget, save, and properly implement a repayment plan that allows them to attack one debt source at a time may find these a smaller principle amounts easier to erase and, if this is the case, it could lead to a consumer getting out of debt faster and at lower overall costs without the need of debt consolidation.