Should You Go for Debt Consolidation?

How many monthly loan repayments do you make?

Let me guess – currently, you might be carrying home loan, student debts, an automobile loan, and some amount in credit card debts. Most of us, depending on our current financial portfolio, carry some amount of loans with us, for an extended tenure. Added to the mix are bills and some other mandatory payments expanding the monthly expenditure drastically.

Each loan comes with its own set of interest rates, due date, and payment gateways – making the debt repayment a stressful process. You have to keep track of a whole lot of details, to make the payment, making the entire process cumbersome and lengthy.

One way out of this entire lengthy process is debt consolidation with the help of a personal loan. According to the credit union handling personal loan in Wareham, a borrower can combine all his existing debts and make a payment via an approved personal loan. This way, you make only one payment at the end of the month and get a lower rate of interest on all consolidated loans. Additionally, debt consolidation does not impact the credit score.

However, before you head for a consolidating your loans – you should thoroughly consider the pros and cons. You see, debt consolidation is a good idea, but it is not for everyone.

Let’s learn about debt consolidation a little more – before signing out the dotted lines – to make a learned decision.

What is loan consolidation?

In banking terms, loan/debt consolidation is a process of combining all the existing loans and paying them off with a single mortgage, usually an unsecured personal loan. Prospect of combining the loans and making a once a month payment, with a lower rate of interest and lesser monthly payments makes loan consolidation a favorable for people with student loans, outstanding credit card debts, or some other liabilities.
 

How does it work?

Since loan consolidation is a simpler way of paying off the loans, most of the time borrowers take up this loan to pay off their existing debts. After the loans are paid off, they (the lender) has to make the payments towards the new loan on a new interest rate. Usually, banks or credit unions offer personal loans. However, few online lenders have recently introduced personal loans into their offered services.

One thing to note here is that debt consolidation does not eliminate the existing loan – it just transfers the existing loan from one lender to another. For consumers looking for loan relief, it is not the best option.

When should you consider it?

According to experts, there are two scenarios where loan consolidation is helpful:

1. Higher interest rates

People paying high-interest rates often consider consolidating their loans to pay less for an extended period. The floating/fluctuating rate of interest at times becomes expensive for borrowers. Additionally, the debtor might have received the loan at an inflated rate of interest (due to lower credit score during loan application). In this case, getting a personal loan to pay off the debt in one go could be a great idea.

      2. Difficulty in meeting the financial ends

Financial difficulties can make it harder for you to make the monthly payment on time. Sadly, failure to pay the loans on time can affect the credit score and make it more difficult for you in the future. With debt consolidation, this can be avoided.

If you are still interested in the personal loan, then you should approach PCT Federal Credit Union. Being in the community for more than five decades, they have been helping their members with their financial needs. For more insight on personal loan Wareham, visit http://www.pctfcu.org/ or call 508-291-0777.