Generally, a debt consolidation loan can be one of the best ways to manage your credit card balances – and in some cases, it can even help you to reduce your interest rates(and therefore monthly repayments), too. However, while this can often be the ideal solution for those who want to work towards a better financial situation, you may be wondering how much it’ll cost you to consolidate your debts.
What is debt consolidation?
With the help of one of these kinds of loans, you’ll often have the chance to roll all of your debts into one. Because of this, you’ll often switch from having multiple lenders, payments, and accounts to just one, which can often simply things for you.
If you have a good credit score, you may also be able to reduce the interest rates of your debt by turning it into one loan. You could further reduce your monthly payments by choosing a longer term too – although in most cases, you’ll pay more interest over time with a longer loan.
What kinds of debt can you consolidate?
Usually, these types of loans are used to combine high-interest, unsecured debt. While many people use it to help them to clear their credit card balances, they can often be used to pay off a number of other debts as well; such as medical bills, personal loans, and payday loans.
The amount of debt that you consolidate can often depend on the company offering you the loan. Some may carry lending options as small as $1,000, while others may allow you the opportunity to consolidate debts up to (and in some cases, even more than) $50,000.
How much do debt consolidation loans cost?
If you hope to roll all of your payments into one, you might be wondering how much you’ll have to pay to get a debt consolidation loan. Often, this can depend on the company offering the deal. From the percentage of origination fees you’re charged (which, aside from the 0% introductory rates, typically range from 1% and 8%), to application fees; the amount you’ll end up paying could vary quite a bit.
What does debt consolidation involve?
If you’ve found yourself in a lot of debt, the option to consolidate may be available. What this means is that if you’re in a position where you can’t repay the amounts you have borrowed from multiple lenders, you may be able to financially consolidate everything into one lump sum.
This can act to negate duplicate interest rates that feature on so many different types of loans. If you imagine for a moment that you have 5 separate loans, each of them would be subjected to their own rate of internet. By consolidating these to an agreement with one lender, and therefore a single repayment plan, you could minimize the amount that you owe and eliminate any excessive interest rates as well.
How can you find out if you can consolidate your loans?
One of the most effective methods to find out is by contacting your lenders directly to ask them. Many people find themselves unsure of what they can and can’t say to a lender, but the reality is that they simply want to ensure that they receive their money back at the very least, and with a profit if possible.
Even if you have found yourself in a position where you may have over borrowed, your lender will be far more likely to offer an alternative situation to help you to meet your repayments. Their other option would involve them having to chase up debtors, pursue repossession on orders, and more. Lenders simply want their money back, and this can provide power to the borrower, who may be able to obtain a debt consolidation plan rather than default on their payment entirely.