You need to analyze the costs and benefits of debt consolidation before you make up your mind. Debt consolidation services may offer to help you consolidate your debts at a lower interest rate, with a lower monthly payment. However, if you look carefully, you may find that the lower monthly payment is due to a longer term rather than a lower interest rate. You will have to pay much more interest, so it may not be such a good deal after all.
Will it help you to save money?
While extending the term of a loan will allow you to have lower monthly payments, you will end up paying much more interest. Debt consolidation may make more sense if it will help you to consolidate several high-interest rate loans into one loan that carries a lower interest rate. If the term of the loan is not increased, this will actually help you to save money. Find out about all the charges involved before you decide.
Seek professional advice and use an online loan calculator to assess your options. To get free, no-obligation advice on your loan consolidation options, please fill out our brief online form now.
Will debt consolidation really solve your financial problems?
Remember, there’s no short cut to reducing your debt. You need to change your spending and credit habits, live within your means, and repay all your debts. If you consolidate your debts and get a lower monthly payment by extending the term of the loan, you will pay more interest and stay in debt for longer.
Does it make sense to extend the term of a loan?
If you are not able to change your habits, you will probably spend the money saved through lower monthly payments. If there’s an emergency, you will not have any savings and may end up with even more debt than before. However, if your need is dire, you may still want to reduce your monthly loan payments by extending the term of the loan.
Focus on improving your finances
You need to think about ways of boosting your income, paying off all your debts, and saving for a rainy day. It’s not easy to change your spending and credit habits. You need to make a list of all your debts and start paying them off. A family budget will help you to gain control over your finances. If you feel you can’t do this on your own, you can seek help form a reputable financial counselor.
Watch out for scams
Be cautious about seeking help from debt management and consolidation services. There are many debt consolidation services that offer to help people who are facing financial difficulties. Some are honest and others are out to exploit people who are facing financial problems.