Do you think it is a good idea to get a loan to consolidate all of your debts so that you only have one debt to pay in the month? I want to do this but at the same time it would be interest that costs more than the credit card interest, what do you think?
If the interest is much higher, then I don't recommend it. Dave Ramsey doesn't recommend it, I think. However, I believe if you are able to get a lower interest rate - then I would go for it.
If you add up all the interest rates of your creditors and see if the total exceeds what the interest rate would be on the debt consolidation loan. If it does then I would go for it if it doesn't well stick to what you are already doing.
I have recently got a loan and within the same week they deducted the amount off of the loan, therefore they gave me less and I am paying for another amount. Make sure that when you get a loan you have the correct dates and fixed interest set up to avoid getting into a mess.
It definitely makes sense if you are arbitraging the interest rates. It can save you a lot of money over the longer term. But you also need to look into the small print of the loan that you are taking out and the term. Plus, your goal is to get out of debt so make sure that that is the ultimate goal, rather than simply taking on a different debt and not getting rid of it.
It depends on the terms and conditions of the consolidation, to be honest with you. If you don't have very much debt, and can transfer it all over to make one payment without increasing the amount of interest that you pay, then it could be more than worth it. If you would end up paying more interest, though, I would recommend that you just keep the payments as they are but just be very organised with regards to how you get through it.
If the interest is worth more than the current interest you are paying on all of the credit cards, you'll have to weigh your situation closely. If you're consolidating credit card debts for which you are only paying the minimum, the interest for the current month will become part of the principal for the next month whereas if you consolidate your loan, you'll be paying a fixed monthly payment for both principal and interest. So you see, the interest rate on your current loans may be lower but the principal gets bigger each cycle so you end up paying more interest. Likewise, it is so much easier to manage a one-a-month payment over multiple payment due dates. Late payments are charged by bank and that adds to your debt. If you're paying multiple annual fees for all those debts, then it's cheaper to pay for one annual fee. It will all depend on the status of your current debts as well as your own financial standing at this time.
I think it is not a bad idea to take a single loan to pay off our various debts and then focus on repaying that loan alone. I would be interested if the big picture is in favor of me. If at the end I have to give more than what I have to today then I may abstain from taking another loan. I would prefer to go for a loan based on reducing balance interest. It would be beneficial if I can pay more than the actual EMI which will directly influence my interest. If I could pay a good amount in a short period of time my capital amount would be reduced and also the interest levied on that.
There are definitely legitimate options for consolidating debt, but there is no one-sized-fits-all solution. No matter what type of debt consolidation you’re considering, a good first step is to evaluate your current financial situation. Begin with a budget review, so you have a clear understanding of your monthly cash-flow, as well as the assets you own. This will help you figure out how much you can afford to pay towards your debt each month and whether your current assets can help you consolidate your debt. It also makes sense to evaluate your credit report. This way, you’ll get an accurate picture of all your debts. You can also make a quick judgment on your own credit rating. The stronger your credit score, the more debt consolidation options you’ll have
