With Christmas approaching, it’s time to save. By consolidating all your debts into one loan, you can use the interest saved to buy gifts for the family!
A debt consolidation loan consolidates all of your personal debts into one, which means you could benefit from a regular repayment and a lower amount of interest to pay over time. Let’s take a closer look.
What debt can I consolidate?
Usually, you can consolidate all of your debts into one loan. This can include auto loans, credit cards, other personal loans and even buy now pay for subsequent purchases. However, you should keep in mind that lenders have a cap on the amount you can borrow. When you look at lenders, make sure they are offering enough to cover all of your current debts.
If you have a home loan that has a longer term than your other debts, consider mortgage refinancing. It is not ideal to transform your mortgage into personal credit since mortgage rates are currently much lower than those for personal loans.
How do I know if debt consolidation is right for me?
If you’re dealing with multiple debts, you might be missing out on saving money. For example, if you have high interest credit cards, store cards, or even personal loans, they all add up. A personal loan with a much lower interest rate can help. Please keep in mind that if you can track your repayments or are on the verge of repaying them, maybe applying for a consolidation loan might not be for you. Just be sure to check your finances and find what works best for you.
Here is an example :
Here is your debt ($ 32,000 in total):
- $ 23,000 car loan to8.00% interest rate
- $ 5,000credit card balance at17.50% interest rate
- $ 4000 on store card at20.00% interest rate
Currently, you would pay a combined monthly repayment of $ 1,078 if your debts have remained separate. Over three years that would end up costing you $ 5,892 in interest.
However, if you opted to convert your debt ($ 32,000) into a debt consolidation loan with an interest rate of 8.00%, your repayment would be $ 1,003. This would mean that over three years you would pay $ 4,099 interest – it’s a savings of $ 1,793!
How To Choose A Debt Consolidation Loan?
You must first decide with what type of lender you want to consolidate your debts. It could be a bank, a credit union, or peer to peer lenders. You might even find that your own bank offers this type of consolidation service, but before you commit, it may be worth shopping around.
Sometimes some of the most competitive debt consolidation loans are provided by online lenders or small lenders that you may never have heard of before. All of the lenders on the Mozo website are accredited lenders, so you can use our debt consolidation comparison chart with confidence.
After you’ve found a lender with a good interest rate and a loan amount that works for you, it’s time to apply!
If you want to learn more about personal loans and debt consolidation, check out Mozo’s personal loan guides.
* DISCLAIMER: The Comparison Rate combines the interest rate, fees, and charges of the lender into one rate to show the true cost of a personal loan. The comparison rates displayed are calculated on the basis of a loan of $ 30,000 for a term of 5 years or a loan of $ 10,000 for a term of 3 years as indicated, on the basis of monthly repayments. principal and interest, on a secured basis for secured loans and on an unsecured basis for unsecured loans. This comparison rate applies only to the example (s) given. Different amounts and terms will result in different comparison rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.
^ See information on the Mozo Experts Choice Personal Loan Awards
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