Debt consolidation is a popular way to repay debt by combining multiple debts into a single loan. However, it’s not a quick fix, and it’s important to evaluate your financial situation before proceeding.
Debt Consolidation
- Fees: There may be upfront fees, such as an origination fee for processing the loan, or balance transfer fees for credit cards.
- Credit score: If you have a lower credit score, you might not qualify for a favorable offer, or you might receive a higher interest rate.
- Monthly payments: Consolidating debt can sometimes increase your monthly payment, especially if you were previously paying only the minimum due on your credit cards.
- Repayment period: The repayment period for a debt consolidation loan can be long, sometimes up to seven years or more.
- Credit damage: If you miss payments, your credit could suffer.
- Temptation to spend more: If you consolidate your credit card debt into another loan, you might be tempted to run up those balances again once the cards are paid off.
- Loss of benefits: You might lose certain borrower benefits.