Vital Need to Know Loan Consolidation Facts

Vital Need to Know Loan Consolidation Facts

If you're thinking about taking up one of many credit card or private loan offers that you see on the television, in the paperspapers or hear on the radio, consider the following :

A personal loan that may combine your obligations into one easy regular or fortnightly payment sounds great and appears to be a great offer.

When we find a special deal or an offer that is's 'too good to be true' our natural instinct is to ask 'what's the catch'. However with consolidation loans people appear to leave their natural instinct at home.

Frequently this is thanks to the fact that we are blinded by 2 facts :

1. We look at the loan amount and
2. The monthly repayment.

If these 2 facts mixed are better than what we are currently paying on our loans we immediately believe we are securing a superior deal by consolidating our debt.

While these 2 points are terribly important they're not everything you want to consider when deciding if bill consolidation loans are right for you. Don't let the loan company make you believe that because you are able to afford the repayment amount and this amount is less than your present minimum debt payment, this is all you need to know regarding your consolidation loan.

When you look at repaying your consolidation loan we say to ourselves, one monthly repayment is far better than multiple monthly repayments on multiple obligations. But we really need to take a look at the exercise in its totality. Breakdown each debt that is going into the consolidation loan. That is, how much is owed, what's the rate of interest, what is the minimum re-payment and how long will it take to repay.

Add all of your liabilities together and compare it to your consolidation loan details. Mostly you can realize that you are better off with a consolidation loan however it is worth doing the exercise to fully appreciate how your circumstances are going to switch in terms of monthly outgoings towards your arrears under a consolidation loan.

When you have come this far, glance at the type of IR that is been offered, is it an adjustable rate or a fixed rate? Bear in mind if it is variable and IRs rise in the term of your consolidation loan, your re-payments will also rise. Always ensure that the rate of interest on your new consolidation loan is lower than your present obligations. Also look at what occurs if you make extra payments towards your consolidation loan. Say you get a pay rise or a surprising money bonus and you make a decision to pay your consolidation loan out faster, what are the penalties?

Many lenders have a fee attached to early pay out of consolidation loans. This is not necessarily a pathetic as some folk are pleased to pay the loan to the end making the mandatory monthly payment. When you're considering consolidate my student loans glance at the 'fee schedule' ( each loan offer should have one ). The fee schedule tells you about all of the other costs that may be related to your consolidation loan. Things like account keeping fees and broker's commission.

Each consolidation loan comes with fees and this isn't necessarily a bad thing but you should ensure that you consider the fees in your regular payment. That is, if the account keeping fees are $600 and are figured out separate to your monthly payment and your loan term is 60 month's your regular payment is really an extra $10.

We highly recommend if you're consolidating store cards and credit cards into one consolidation loan that you cancel those cards when your consolidation loan is approved . Once your consolidation loan is established your store and credit card boundaries will be most likely restored. Do not risk temptation by leaving them active with credit available, cancel the cards! By consolidating your debts you may actually have started on the trail to be 'debt free'.