If you are thinking of taking up one of many credit card or personal loan offers that you see on the telly, in the paperspapers or hear on the radio, consider the following :
An individual loan that may merge your liabilities into one convenient monthly or fortnightly payment sounds great and looks 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 folks seem to leave their natural instinct at home.
Often 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 two facts combined 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 vitally important they aren't everything you must consider when deciding if
bill consolidation loans are perfect 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, that this is all you must know regarding your consolidation loan.
When you look at re-paying your consolidation loan we say to ourselves, one monthly repayment is better than multiple monthly payments on multiple liabilities. But we need to take a look at the exercise in its totality. Breakdown each debt that's going into the consolidation loan. That is, how much is owed, what is the IR, what's the minimum repayment and how long will it take to pay off.
Add all your debt together and compare it to your consolidation loan details. In most cases you may realize that you are better off with a consolidation loan however it is worth doing the exercise to totally appreciate how your circumstances are going to modify vis regular expenditure towards your arrears under a consolidation loan.
When you have come this far, glance at the kind of interest rate that is been offered, is it a non-fixed rate or a fixed rate? Bear in mind if it is variable and interest rates rise during the term of your consolidation loan, your re-payments will also rise. Always ensure that the interest rate on your new consolidation loan is lower than your present obligations. Also look at what occurs if you make additional payments towards your consolidation loan. Say you get a pay rise or an unexpected money bonus and you make a decision to pay your consolidation loan out quicker, 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 happy to pay the loan to the end making the mandatory standard payment. When you are considering
consolidate my student loans glance at the 'fee schedule' ( every loan offer should have one ). The fee schedule tells you about all of the other costs that may be associated with your consolidation loan. Things like account keeping charges and broker's commission.
Every consolidation loan incorporates costs and this isn't necessarily a bad thing but you need to ensure that you consider the charges in your regular payment. That's, if the account keeping fees are $600 and are worked out separate to your regular payment and your loan term is sixty month's your regular payment is really an extra $10.
We highly recommend if you are 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 Visa card limits will be most likely revived. Don't risk enticement by leaving them active with credit available, cancel the cards! By consolidating your arrears you may very well have began on the path to be 'debt free'.
