Well, first things first, debt consolidation is debt refinancing form that comprehends taking out one loan to offset many other loans. This therefore, commonly refers to a personal finance process of individuals addressing high consumer debt but occasionally refers to a country’s government debt. Now, should I get a debt consolidation loan to settle off my credit cards? The following are a few tips to make sure you are not falling into a trap:
Do the math
Yes, do the math on your credit cards and their interest rates , figure out how long it would take you to pay all of them off at your current payment rate. Make a comparison of this to the consolidation loan you are looking at taking out. The longer the repayment time, the larger the amount of money you are going to pay as interest.
Check Out your Monthly repayment
It is important to check your monthly payment on a debt consolidation loan would actually be. The question is, are you paying off the debts now or you just left that out for some other time? If what you are paying currently is not enough, then it is high time you increase the amount of money you have been paying towards settling the debt in order to reduce the amount of time it will take you to have it completely settled .
Consider the state of your cards after loan settlement
Once your debts are paid off, will you cancel the credit cards? Here, it is important to note that one should get credit cards with zero balance and no bills out of the loan, but the problem here is that debt consolidation loans do nothing to change the behaviors that got you in to the debts in the first place instead what they do best is add yet another debtor in your list.