The primary reason to consolidate debt is to make your monthly payments smaller. When financial institutions, like credit unions and banks, offer consolidated loans, what they are offering to do is pay off in full all of a consumer’s loans (credit cards, car loans, hospital bills, student loans, etc.) and lump the entire debt into one single “consolidated” loan that generally has a fixed interest rate that is much lower than the cumulative finance charges of all the smaller loans.
So if your monthly payments are getting out of control, if you’ve got decades left of payments ahead of you, and if there’s an attractively lower, fixed interest rate you find yourself eligible for, a consolidated loan may be just the thing for you. But it may not be. Read on:
While a consolidated loan offers you smaller monthly payments, you’re typically agreeing to years, possibly decades, more of debt. This is how such low interest rates are even able to be offered in these consolidated packages. Do you want to be paying off this debt for 20 more years? How about 30?
And don’t forget: when you consolidate debt, you end up paying more in...
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