If you have been buried under a mountain of debt, you may have heard about debt consolidation. Debt consolidation is when you take out a loan to repay all of your debts including credit cards and loans.
After, you will just make one fixed rate payment to the debt consolidation loan provider. This helps consumers lower the number of bills they keep track of
Additionally, a debt consolidation loan may be offered at a much lower interest rate than the ones you are likely paying now.
What is the best way to consolidate debts?
Experts agree that there are two recommended ways consumers should consolidate their debts. First, is a personal loan, which is often referred to as a debt consolidation loan, and the other is through a low or 0% interest balance transfer.
Debt Consolidation Loan
A debt consolidation loan is a personal loan you use to pay off all your existing debts. Since a debt consolidation loan is a personal loan, the loan is paid back over a series of installments at a fixed rate for a set period of time.
A shorter term debt consolidation loan will result in a higher fixed payment, but less overall interest expense. If you decide to get a longer-term debt consolidation loan, your fixed payments will be lower, but you’ll be making payments for a longer period of time and spending much more on interest expense through the life of the loan.
Balance Transfers for Debt Consolidation
Balance transfers are an effective way for consumers to consolidate their debts. With a balance transfer, you transfer all of your debts, regardless of their type or form, onto the new credit card. This may also include loans.
Most credit card companies offer a 0% interest balance transfer for the first year. Since it is a 0% interest rate, all your payments will go towards paying down the debt, instead of covering interest expense. The key is to have your debts repaid before the0% interest introductory period is complete.
Being under a pile of debt can be hard to overcome, but a debt consolidation loan or balance transfer may provide the relief you need.
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