What is debt consolidation?
| A debt consolidation loan is a loan, generally from a bank or credit union, that you use |
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to repay many other debts. For example, if you have five credit cards, you may be able to get a debt consolidation loan to pay off the credit cards. |
What are the advantages of a debt consolidation loan?
The advantages of a debt consolidation loan are:
Here’s an example. If you currently carry a $5,000 balance on three credit cards, with an interest rate of 18% per year, you are paying approximately $225 per month in interest on your $15,000 in debt. If the credit card requires you to pay, say, 3% of your balance off each month as well, your monthly payment next month will be approximately $675.
With a debt consolidation loan at a 7% interest rate, paid over five years, your monthly payment is less than $300 per month, for a very significant savings.
Do I qualify for a debt consolidation loan?
To qualify for a debt consolidation loan you must meet the following:
If you have poor credit, a co-signor will probably be required. Asking someone to co-sign for you is a difficult decision and should not be taken lightly, as any non-payment by you will directly impact on your co-signor’s credit score.
What is the next step in obtaining a debt consolidation loan?
To determine if you qualify for a debt consolidation loan, contact your banker or finance company.
