Should you consider Debt consolidation?

You can stop paying high amount of interest by use balance transfer. However, if you have many high interest credit cards that contain a burden of debt which hard to reduce, you should use a debt consolidation loan.

You could combine some credit card account with high interest rate into one loan that has lower interest rate. For example, if you have three credit cards with high balances at 15 percent interest rate, you could combine all balances into one loan with an interest rate of less than let’s say 8%. However, it’s subject to your credit score.

You will not only save interest payment because of lower interest rate, but you’ll also eliminate your credit card debt to zero. You have only one payment in each month; this is conceptual of debt consolidation. Debt consolidation loans are often use for homeowners. By refinance mortgage, or use a home equity loan to make payment of credit card debt and consolidate the balances into the one.

The disadvantage of debt consolidation is transforming debt from short-term credit card to a secured loan that have mortgage as collateral. If you are unable to make payment for this loan, you lose your house. However, if you are able to make payments for this consolidation loan, you will save money from lower interest rate and your credit score still good.

When you read to this paragraph, I want to let you clear that debt consolidation loan doesn’t eliminate the debt, It’s just allows you to combine high-interest credit card debts one lower- interest Loan, so you still have to pay your debt but lower in interest rate. Before you start to consolidate debt you must make sure that fees, closing costs, and interest charges associated with the new loan is worthy- make benefit for you. Financial planner or consultant can help you to judge the loan is worthwhile for consolidate.