Pros and cons of consolidating
Debt consolidation is primarily designed for unsecured debt (i.e. When you consolidate your debt, you take out a loan to pay off several other debts.This allows you to consolidate the money you owe into one payment.WARNING: It is very dangerous to consolidate federal loans into a private consolidation loan.
With a credit card consolidation loan, you work with a lender to combine all of your unsecured debt into one monthly payment.The lender will pay off your credit card bills, and in exchange you’ll enter into a loan agreement with the lender to pay back the money.For a credit card consolidation loan to be worth your while, you’ll want a plan that offers a lower interest rate and/or lower monthly payments than you’re currently paying to your creditors.Both put the control in your hands, which can be good or bad, depending on how disciplined you are.
Remember, you’ll need to not only put together a budget, but stick to it as well.The first of these is that the interest rate on your debt consolidation loan should be lower than the rates of the debts you’re consolidating.