Getting a debt consolidation loan means that you go to a bank and borrow the amount of money you need to pay-off your other debts. With all those debts covered, now you just need to worry about paying back the bank loan. This sounds really easy and a lot of people think that debt consolidation loans are the answer to all of their financial problems. What these people need to know is that debt consolidation is not a magical cure, it is just another tool to use to help you deal with your debts.
A debt consolidation loan does just what it sounds like it does. It takes all of your debts and puts them into one big ball instead of a bunch of little ones. Here’s the problem: a debt consolidation loan does not actually save you money. You still owe the same amount and you often pay only slightly lower, or the same interest rate.
For example, if you have 6 credit cards with balances of $3,000 each, and you get a loan for $18,000, you still owe the same amount of money, except now you can focus your energy on paying off just one debt instead of having to figure out multiple monthly payments. For many people, the convenience and simplicity of only one monthly payment is exactly what they need to get their life back on track.
Before you get a debt consolidation loan, you really need to make sure that you can afford the monthly payments. If you can and think that having multiple debts to pay-off is confusing you and making it harder for you to get rid of them, then a debt consolidation loan may be for you. You will need to go to your bank or finance company to research your options and see if you can even qualify for a debt consolidation loan.
If you can’t, don’t worry, there are many other options to get you out of debt. If you would like to hear about some of them you can call us today in Toronto at 310-PLAN (no area code required) or e-mail us to speak with one of our professionals.
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