Debt Consolidation: Is this option for you?

What is debt consolidation? It’s a process of taking multiple debts and streamlining them into one single new loan with a lower interest rate.

Is debt consolidation a good idea? It could be. If you have credit card debt for example your interest rate is usually has a higher interest rate than a personal loan. Student loans usually have a lower interest rate so it’s important to write down all your debts to see the big picture of the amount owing and interest rates for each balance.

Pro’s of Consolidation Loan

• Makes debt management easier by combining loans into a single, simplified one payment.
• Consolidating into a secured loan, zero-interest credit card balance or low-interest personal loan could lower a borrower’s overall interest rate.
• Extending the loan term may reduce a borrower’s overall monthly debt payment, though this may result in higher interest costs over time.
• Fixed loan payments can help borrowers pay off their debt faster, especially if they are consolidating a large amount of credit card debt.

Con’s of Consolidation Loan

• Lenders may charge fees for loan origination, balance transfer, or closing.
• The borrower may be required to put up their home as collateral. This does not guarantee a lower interest rate, especially for borrowers with poor credit.
• A longer repayment period could lead to a higher overall cost.
• Borrowers are not required to improve their money management skills, so the debt may return.

Now that you have a better understanding of consolidating your debts all share with you what I did to get out of debt over 3.5 years.  And remember it IS possible if you are dedicated & determined!

I did a combination. I used my line of credit and then got a bank loan at a lower interest rate which allowed me to pay down more of that debt.  Then I found a credit card that had a balance transfer promotion where you don’t have to pay interest for one year.  I also did this! 

With the option of using a zero percent balance transfer, you have to be very serious about throwing as much money as humanly possible at your debt while you’re on an interesting holiday. Do not do this if you’re not willing to seriously commit. 

USE: The MBNA True Line Mastercard (for Canadians) has a 0% balance transfer promo rate (12 months) & no annual fee!