Why Consolidate Your Debt
You may want to consider consolidating you debt if you are having trouble making the payments on all of your loans. If you have several loans with high interest rates and high monthly payments you can put them all into one loan for a longer period of time and make a smaller payment each month. The common types of loans that you would want to consolidate are credit cards, high interest car loans, boat and RV loans and any personal loans with a high interest rate.
Disadvantages of Debt Consolidation Loans
If you have a few credit cards that are charging you 20 percent interest but have a low balance, say under $2000.00, you could put a little extra toward the balance each month and pay it off in a year. If you were to put them into a debt consolidation loan, you would be paying a much lower interest rate but paying on them for the next 15 to 30 years. Over this much time you will be paying much more than if you paid the higher interest rate. Plus, most debt consolidation loans are mortgages and will attach to your property, so you want to make sure you can afford the extra payment or they can foreclose on your home.
Advantages to Debt Consolidation Loans
If you are getting behind on credit card payments you start to get charged late fees which only makes your balance and your payment higher. If they are over 30 days late, you may be hurting your credit score. If there is no way you can keep up, then a debt consolidation loan is for you. You can take all of your debt and put it into one loan at a lower interest rate for a longer period of time, resulting in a much lower payment. One you can afford, and keep a good credit rating. If you do this, do not make the mistake of running up your credit cards again and having no way out.
Where to Get a Debt Consolidation Loan
You can start by contacting a mortgage broker in your area. They will sit down with you and figure out what type of program is best for you. If you have a lot of equity in your home, you may consider refinancing your first mortgage to get the best rate. You can also take out a second mortgage or open a home equity line of credit. If you don't have too much debt you may try one of the bigger credit card companies and see if they have a program where you can transfer all the balances of you other cards with a lower interest rate. Local savings and loans are also a good place to try to get a personal loan. You may be asked to do some credit counseling by the company that agrees to do your loan.
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