Advantages and disadvantages of consolidating debt
This means that most of your monthly instalment is used to pay interest, and it is difficult to actually pay off your debt.It can also put you under pressure if interest rates rise unexpectedly.• A lower interest rate does not necessarily mean a saving.
The article titled, “The Dos and Don’t of Loan Consolidation,” talks to consumers explaining how debt consolidation may not always work as advertised. When you are employed, with a steady income, you tend to spend more.As soon as that income drops or disappears completely, many people find themselves in deep trouble.All it takes is a few months of reduced income to get to a point where you are in arrears with several payments.Your first option should be to sit down and compile a detailed list of your current income and expenses.The article starts off by highlighting the importance of a credit score.
Loan consolidation brings in a new interest rate that is dependent on the credit score.
Credit Card Balance Transfer If you find that you have a couple of credit cards that you have maxed out, a good option is to transfer the balances to a credit card that charges a lower interest rate.
There are many offers available from credit card companies which will enable you to do this.
At present, the three credit-reporting bureaus: Experian, Equifax, and Trans Union, are required by law to give out a free copy of a credit report once a year to a consumer.
A credit score can sum up the consumer’s financial habits in three numbers.
This is often done to secure a lower interest rate or for the convenience of paying only one loan.