When consumers are looking for a way to consolidate their debts into one monthly payment, a traditional personal loan that can be used for debt consolidation is typically one of the first points at which these consumers will start their journey, but it’s important that consumers remember that they need to compare rates as there are different options across the nation, sometimes on a state to state basis, that may offer them the opportunity to find more affordability in terms of their overall monthly payment on debt obligations. Yet, what consumers may find if they properly researched these debt consolidation loans is that for some a consolidation loan will not be in their best financial interest and, as a result, alternative options for debt relief may need to be explored.
However, here in early July average rates on these personal debt consolidation loans may fall anywhere between 11.95% to 27% or higher, and this is where a consumer must remember that the interest rate they receive will ultimately lead to higher overall costs, particularly on a consolidation loan that may be consolidating a large amount of debts. Many consumers may feel that one interest rate, no matter how large, will be more affordable than multiple rates on various debts, but this is not always the case as the principal amount on a debt consolidation loan will take a long period of time to repay, in many cases, when compared with the amount of time it may take to pay off debts when they are separate.
Consumers may be aware that many financial advisers often press for men and women seeking a debt consolidation loan to explore options that will allow them to pay off their debt without using this form of relief assistance. There are cases where, when proper budgeting and repayment techniques are implemented, consumers can pay off smaller principle amounts on multiple debt obligations much faster and at lower cost than a consolidated loan, but there are of course cases where consumers are facing financial hardships and cannot meet the total minimum payments on all of their debts right now.
If this is the case and a debt consolidation loan may be helpful for a consumer in this aspect, when looking at personal loans that can be used for debt consolidation, consumers need to be wary of advertised rates versus the rates that may arise at a later date, as many debt consolidation loans may come with a variable interest rate. What this could lead to is a consumer finding themselves in a position where, upon easily being able to meet minimum payments on their personal loan that was used to consolidate debt, they may face a rate increase in the future, which could make repaying this loan just as difficult as when a consumer was trying to pay their debts separately.
In cases where consumers are unsure of where to start in terms of debt relief, there are credit counseling agencies that can help consumers review their financial situation, may be able to offer advice on debt consolidation options for a particular consumer’s predicament, or there are cases where some consumers may enter into a debt management plan if their situation is severe. While there are debt consolidation loans that have been helpful for consumers and allowed them to erase their debts and continue on in their financial life without continued setbacks, these loans are not a quick fix and must be properly reviewed by a potential borrower to make sure that the interest rate, repayment time frame, and other aspects of this loan will be advantageous to the borrower and help them reach their goal of debt relief.