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Discover what debt consolidation is and when you should consider taking a consolidation loan. http://www.fortworthabvi.com/2019/08/10/payday-bad-credit-loans-same-day-payday-loans-same-day-funding-up-to-1000/ for an assessment
Because there is something you should know, since consolidating debts has its advantages and disadvantages.
If there is something that does not leave you in peace.
- a bank loan for 1500 dollars ,
- a credit card worth 900 dollars , and
- Car loan of $ 1200.
- a phone for the value of 500 dollars .
They are quite debt, and therefore you should be thinking about making a loan for $ 3100 to another bank to pay all your debts and keep only one.
What do you think, is it better to take a consolidation loan or is it better to pay the debts individually?
First of all we must be clear …
What is the consolidation of debts
Because consolidation credit is also a debt, like any other. With the difference that this is a money to pay the other debts you have.
The bank will not send this money to your account, but will send it directly to other banks or institutions with which you are indebted. This way all your current loans will be paid and you will have a single loan , which you need to pay.
A single debt instead of 3, 5 or 10 debts? Sound good, right?
However , you must take into account one thing.
Nothing is for free
When you take a consolidation loan you earn two things.
First , you stop worrying that you forgot to pay one of the installments of your debts. Since you have only one loan and responsibility with only one bank.
On the other hand, surely, you want your monthly payments are lower, than the totality of your current debts.
For example, Francisco, today the day pays 100 dollars for his bank loan , another 100 dollars for a car loan , 50 for his card, and 20 for his phone .
In total Francisco pays 270 dollars monthly. It is likely that after taking a consolidation loan , you will have to pay only $ 200. That ‘s right, your monthly payments will be lower, and this is an advantage … But!
Is the term of paying a consolidation loan equal to the term of all your current debts?
Surely the time is longer, because this is the price you pay for having lower monthly payments.
Instead of paying your debt in 3 years , you will have to pay for the next 4 or 5 years .
And there is something more . You need to verify that there are no other additional costs, such as the cost of security in case of not paying on time. In addition , sometimes you have to guarantee the payment of your loan with your properties or real estate.
That ‘s right, they often charge you commissions and additional costs, and despite paying a lower monthly amount, the total amount of your debt grows. Finally, you’ll pay everything, and this means that moves further away the day when you will be debt free.
Well, you know that consolidation credit has its advantages and disadvantages. So, should you take it or not?
When should you consider taking a consolidation loan ?
It is an option when you meet these 5 points:
- you have prepared your family budget and know your income and expenses well
- you’ve cut all unnecessary expenses to the bone
- you have sold all the things you do not need
- you did everything to increase your income and earn extra money
- You have organized your finances and have a plan to pay your debts.
So, if despite doing all this, you are not able to pay your debts on time, the consolidation credit is for you.
In other words, consider consolidating your debts, only when you have seen and put into practice our guide to get out of debt .
But be careful!
Even if you decide to take a consolidation loan and your monthly fee decreases, this does not stop you from looking for changes and improvements in your finances.
When should you not take a consolidation loan ?
When you can pay the installments of your debts on time, and you only want to reduce your monthly payment with the consolidation loan . Because you already know that this has its price.
Neither if you have a mess in your finances, or your problem is forgetting to pay the debts on time, because they are several.
In these cases, I recommend you watch the video of how to pay the debts with the snowball method .
As you can see, looking for comfort is not a good reason to take credit for consolidating your debts, because this solution only sleeps your conscience.
What you need is not a solution that suits you, but a solution that works.
I trust that with this information you will make the best decision .
Final reflection on consolidating debts
Take a debt to pay other debts, without changing your financial habits that led you to fall into a spiral of debt, is not a solution , but only postponing another financial catastrophe . First of all, order your finances, your habits and your thoughts.
Do not hesitate to share your experience with consolidation credits in the comments.