Debt consolidation can help you pay off your debts faster and for less money each month. If you choose to consolidate your credit card debt, you could pay off your current debts in three to six years. But keep in mind that the terms and conditions of a debt consolidation plan can change.
Different kinds of loans to pay off debt
Depending on how much money you can pay back, you can get different types of debt consolidation loans. For example, there are loans that let you pay off your debts quickly and at lower interest rates. There are loans that let you pay off your debts over a longer period of time, but the interest rate is higher.
There are also different interest rates for debt consolidation loans. For example, if you have a debt consolidation loan with a variable interest rate, you can make extra payments at any time without paying extra. With a fixed rate debt consolidation loan, on the other hand, you can only make fixed payments for as long as the loan lasts.
Use the lowest interest rate you can find.
Many people who want a consolidation loan have trouble getting the lowest interest rate. So, before you sign with a debt consolidation company, make sure that the new interest rate on the consolidation loan is lower than the interest rate you are paying to your creditors. Also, make sure that you can back up your loan with something, like your house.
Calculate the interest and fees on your existing accounts to see if the new interest rate you are being offered on a consolidation loan is better than the current interest rates you are paying to your creditors. This will tell you how much money you have paid so far. Compare this number with the amount of the loan. If you have a good plan for consolidating your debt, you will be able to pay less.
Things to keep in mind if you have a consolidation loan
If you already have a consolidation loan, pay it back on time, just like you would with any other loan. You should send your credit payments to your debt consolidation company because they will figure out how much goes to each of your creditors.
Your creditors will think that you are serious about paying off your debts if you make payments on time. Don't be late with your payments or, even worse, skip them, because this can make your creditors go back to their usual ways of collecting. Even worse, your creditors can put you back on the normal interest rates and fees.
Stay in touch with the person in charge of your consolidation. Your account could be given to a collection agency, so it's important to let your agent know about any changes. So, if any problems come up, your agent can work with you to solve them.
Keep an eye on the bills your creditors send you every month to see if the rates have gone down. Once you have a debt consolidation plan, your creditors should stop charging you late fees. Also, make sure your debt consolidation company pays the right amount to your creditors.
