If you are thinking about taking up one of many credit card or private loan offers that you see on telly, in the newspapers or hear on the radio, consider the following :
A private loan which will combine your liabilities into one easy regular or fortnightly payment sounds great and looks to be a great offer.
When we find a special deal or an offer that's's 'too good to be true' our natural instinct is to ask 'what's the catch'. However with consolidation loans folk seem to leave their natural instinct at home.
Often this is thanks to the fact that we are blinded by 2 facts :
1. We glance at the loan amount and
2. The monthly repayment.
If these 2 facts combined are better than what we are at present paying on our loans we immediately believe we are securing a superior deal by consolidating our debt.
While these 2 points are terribly important they aren't everything you must consider when deciding if bill consolidation loans are best for you. Don't let the loan company make you suspect that because you can afford the repayment amount and this amount is less than your present minimum debt payment, this is all you want to know regarding your consolidation loan.
When you look at paying back your consolidation loan we are saying to ourselves, one monthly repayment is much better than multiple monthly repayments on multiple liabilities. But we really need to take a look at the exercise in its totality. Breakdown each debt that is going into the consolidation loan. That is, how much is owed, what is the rate of interest, what's the minimum re-payment and how long will it take to repay.
Add all of your liabilities together and compare it to your consolidation loan details. In most cases you will find that you are better off with a consolidation loan however it is worth doing the exercise to totally appreciate how your circumstances are going to switch in terms of monthly outgoings towards your obligations under a consolidation loan.
Once you have come this far, glance at the sort of IR that's been offered, is it a non-fixed rate or a fixed rate? Remember if it is variable and rates rise during the term of your consolidation loan, your re-payments will also rise. Always make sure that the interest rate on your new consolidation loan is lower than your present debt. Also look at what happens if you make extra payments towards your consolidation loan. Say you get a pay rise or a surprising money bonus and you choose to pay your consolidation loan out quicker, what are the penalties?
Many banks have a fee attached to early pay out of consolidation loans. This is not always a pathetic as some folk are happy to pay the loan to the end making the mandatory monthly payment. When you are considering consolidate my student loans glance at the 'fee schedule' ( every loan offer should have one ). The charge schedule tells you about all of the other costs that may be related to your consolidation loan. Things like account keeping costs and broker's commission.
Every consolidation loan includes fees and this is not always a bad thing but you should make sure that you consider the costs in your regular payment. That is, if the account keeping fees are $600 and are figured out separate to your monthly payment and your loan duration is 60 month's your regular payment is actually an additional $10.
We highly recommend if you are consolidating store cards and credit cards into one consolidation loan that you cancel those cards when your consolidation loan is approved . Once your consolidation loan is established your store and Mastercard limits will be most likely restored. Do not gamble temptation by leaving them active with credit available, cancel the cards! By consolidating your obligations you may very well have started on the trail to be 'debt free'.
Alfred, loans for bad credit and personal loans for people with bad credit specialist.
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