With a debt consolidation loan, you can pay off all your debt and make a single payment each month, but before you do this, there are five key things to consider.
Debt Consolidation Loans Are Loans
These loans offer consumers relief from their debt, but the truth of the matter is that they are still a loan. Debt consolidation loans come with terms and conditions, interest rates and more. If interest rates increase, you could face financial problems. With higher interest rates, you pay more toward the loan.
Longer Repayment Terms
It can take a person between five and 20 years to pay a debt consolidation loan off. Why? It’s usually the interest rates and upfront fees, which leads to even more debt. This even though installment payments tend to be lower.
Do Some Research
Your new loan should result in a lower monthly payment than all the bills you are consolidating. Make sure to do your research to find the right debt consolidation loan that makes this happen. This includes a low-interest rate and low monthly payment for the entire repayment period.
Read The Fine Print
Be sure you pay close mind to the fine print on the contract like the interest rate, repayment terms, etc. Without paying careful mind to the fine print, you could find yourself in a never-ending cycle of debt.
Debt Isn’t Reduced
With debt consolidation, you do not necessarily reduce your debt, and it’s not a permanent solution to debt. You have to clear your debt, which starts with a debt consolidation loan and remind yourself not to get into debt again while paying the loan off and after.