Debt Consolidation

 

Although debt consolidation is an attractive option for some people, for others it is a step backward in the fight to end their debts.

What is debt consolidation?

What is debt consolidation?

Debt consolidation, also known as a consolidation loan, involves borrowing from a bank or financial institution to repay all of its debts. This loan is then repaid by making a monthly payment.

The benefits of debt consolidation

The benefits of debt consolidation

For people with a good credit history, debt consolidation has several advantages:

  • Debt consolidation reduces the average interest rate on debts;
  • The monthly payment on the debt decreases;
  • Debt management is simplified (one-stop shop).
  • Have a good credit record (do not be late in your payments);
  • Have a debt ratio below 40%;
  • Have a stable job;
  • Have an endorser in some cases;
  • Stop using your credit cards.

The criteria for making a debt consolidation

The criteria for making a debt consolidation

  • Have a good credit record (do not be late in your payments);
  • Have a debt ratio below 40%;
  • Have a stable job;
  • Have an endorser in some cases;
  • Stop using your credit cards.

Warning

Warning

Although this option may seem advantageous, it is not in all cases.

  • Make sure that the interest rate offered by the financial institution is advantageous. Feel free to shop your rate with several institutions.
  • Make sure the monthly payment requested by the institution meets your budget.
  • Be sure to protect your endorser if this is the case. You would not want to cause financial trouble to this one if you are late in your payments.
  • Make sure you do not go into debt after consolidating your debts. Your consolidation loan may inflate and you may not be able to make the payments. Cut your credit cards and abstain until your consolidation loan is 100% refunded.

If you have questions about debt consolidation or are not sure that a consolidation loan is the best option for you, please contact us toll free.

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