By Debt Consolidation Loans
You are behind with your payments. Your credit cards are at their limit, already bearing a car loan, a consumer loan, and a house payment. Just the fact of paying your bills is making you feel tired and nowhere near to solve the problems. But maybe there is a way to solve it and a tool to help you: a loan calculator.
Debt consolidation loan could be a solution and it could help you transform several loans into one big loan.
There are many testimonials over the Internet that could assure you to make a consolidation loan. Lots of people state that all their problems were solved with the help of this kind of loan. Let’s do our own analysis.
Pros:
1. Several payments in one: A citizen usually pays around 11 different creditors monthly. This way it’s very hard to keep track on all his payments, as for one payment would substantially benefit the debtor.
2. Interest rates are reduced: A credit card is an insecure debt. An unsecured debt has higher interest rates than a secured debt. Therefore the citizen should guarantee with a more reliable good that he possesses. A good example could be the home equity loan, also known as the second mortgage. A mortgage is a secured debt, therefore it has a lower interest rate.
3. Lower monthly rates: Having a lower interest rate automatically decreases the amount of money you have to spend every month on the payments.
4. One creditor: In case there is a problem, there’s only one phone call to be made and the issue can be solved easier with less time spent.
5. Better taxes: The money that are spent on the credit card interest are gone forever, as for the money spent on a mortgage interest could help cut down some of the other taxes.
Cons:
1. Recidivism: Once you have some money left at the end of the month it could turn out that you return to your old habits and start using your credit card again until you find yourself again in debt.
2. Bigger payment plan: Instead of trying to pay off your debt in several years, you now have to pay them over the course of 10-30 years.
3. Spend more in the long run: After you finish paying your 30 year old loan it may turn out that you paid a larger overall interest sum, compared to the one you would have paid if you remain in debt for 2-3 years with your old loans.
4. Risk of losing all: In the case of not paying a credit card, only your personal rating would be affected, but you will still have your home.
Unfortunately if you can’t pay your mortgage debt you will lose the asset with which you guaranteed for the mortgage, in this case your home.
Although they could be a solution, you must take into consideration the pros and cons before making a decision about a consolidation debt loan and you should use all the tools available, especially a loan calculator.
More tools on the mortgage calculators website.