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Is Debt Consolidation Right for You?
‘Now’ is always a great time to evaluate your financial wellbeing. If you have several monthly bills that are all due on different days of the month, a debt consolidation loan could help you simplify the monthly bill paying process by offering a single monthly payment and saving you money by moving multiple revolving/high interest (usually variable) balances into one loan. Heavily advertised as the solution to getting your bills paid on time, here’s a candid look at what you need to be aware of before deciding that a consolidation loan is the right solution for you.
Will it pay off all your debts? If not, you may be just changing around the amount you owe on some debt without really accomplishing the goal of simplifying your monthly payments.
Will it take longer to pay off now? A lower payment can mean a longer term. That isn’t necessarily a bad thing, but be aware of how long it will take to pay off the loan. Also, check how much you’ll be paying in interest compared to how much interest you’ll be paying if you leave your current debt alone.
Will you still be able to use your credit cards or other revolving debt? Some lenders require you to close the accounts you are paying off with a debt consolidation, others do not. It may be a smart financial choice to close out those accounts whether required or not or you may find yourself strapped with the original amount you owed on your credit cards within a few months – on top of the debt consolidation loan you took out to resolve the problem.
Are there fees involved? Find out what they are so that you can see if it still makes sense to go ahead with the loan when you take those fees into account.
Will your home be used as collateral? Many debt consolidation companies use a regular salesperson and call him or her a “consultant.” Don’t take advice from these people. Ask questions, do research, and find out what the facts are before you sign anything. Using your home as collateral may make it difficult or impossible to refinance or sell your home should the need arise.
Before you decide that a debt consolidation loan is right for you, visit one of our Financial Centers or call to review your debt situation. Or feel free to apply online now. As you are preparing for your financial wellbeing, there is a light at the end of your debt tunnel. Let us help you find it.
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