Many people fall into a trap by taking a new loan to pay off other loans without considering the long term impact. If you are struggling to make payments towards your existing loans, it’s advisable to approach a firm providing Debt Consolidation services. Combining a number of unsecured loans into a single new loan that is more favorable is called Debt Consolidation.
The new loan may result in a lower interest rate, lower monthly payment or both. It can be used as a tool to make it easier to get out of student loan debt, credit card debt and other types of debt that aren’t tied to an asset.
Points to Note
There are a couple of things consumers need to be careful about while opting for Debt Consolidation.
o Interest Payments – By extending the loan term you can reduce your EMI, but you will end up paying more interest over the course of the loan because of the longer tenure.
o Going for a Secured Loan – Though Mortgage or Home Equity Loans come at lower interest rates, you need to be cognizant of the fact that it will put your home at risk. Exercise caution before going this route.
o Spending Habits – You are struggling to pay your EMIs, still your expenses remains the same. This is sure recipe for disaster. Cut down on the spending and start saving.
o Professional Help – Rather than trying to consolidate debts yourself, take the help of an expert. They can guide you properly and help in negotiating a better rate as well as control the impact on your CIBIL score.