A consolidation loan can make a huge difference to your financial life.
You may have wrapped up huge credit card debts even before you ended year student life.
How would you to start your productive employed life with a fifteen thousand dollar credit card debt against your name? It does not take a rocket scientist to conclude that you will find it very difficult to enjoy your financial life if you start with such a disadvantage.
Going in for consolidation loan will help you take advantage of the low interest rate regime.
Let us presume you have borrowed money at the 26% per annum on your credit card.
This may have seemed like a very good deal when you first borrowed the money.
However, when you discover that the current rate is around fourteen percent, don't you think you can save a lot of money by switching over to a loan that charges interested the current rate? What should you do? Apply for debt consolidation loan, borrow money today and repay the debt that you borrowed a few years ago.
You pay monthly installments to the current lender and try to bring your debt down by saving money on interest.
On the face of it, the advantages of debt consolidation seem to be very good indeed.
However, there are many disadvantages involved as well.
From a holistic point of view, a debt consolidation deal is not a smart move.
Let us presume that you borrowed fifteen thousand dollars at twenty six percent per annum.
You pay interest for two years and then moved on to a twelve thousand dollar loan at twenty percent per annum.
If you spend another two years repaying this debt, you would have a spent four years repaying just fifteen thousand dollars.
Can you imagine the total amount of interest you would have paid? Hence, debt consolidation, for all it is fantastic advantages, is going to be a very expensive affair.
You should opt for this solution only if you are certain that you will reduce debt down to zero.
Further, if your lender refuses to offer a low interest rate until and unless you offer a security, the entire nature of the transaction will change.
From an unsecured loan, you will be forced to going for secured loan.
It is a riskier and complicated affair.
Hence, do not been a hurry to sign on the dotted line as far as debt consolidation is concerned.
Analyze the pros and cons before you take a final decision.