Is consolidating your credit a good idea

Posted by / 24-Dec-2019 03:47

Is consolidating your credit a good idea

One of the more popular forms of consolidation is refinancing your home or taking out a home equity loan.This usually makes sense financially, because those loan rates are almost always going to be significantly lower than credit card rates.Debt consolidation doesn't lower the principal amount you owe, but it lowers your overall payments by reducing your interest rate.That's why it makes the most sense for high-interest debt like credit cards. The downside is that unsecured loans can be harder to get, especially if you have poor credit, and your interest rate will likely be higher.The trouble here is that you’re converting unsecured debt into secured debt and putting your house at risk in the process.

What you do with that space determines whether or not the consolidation is going to work.And all of that’s not including your mortgage, your car payment, your student loan payment, your electric bill, your gas bill, your internet, cable, phone, Netflix and on and on…It’s easy to see why debt consolidation is so appealing.Secured loans tend to have lower interest rates than credit cards, but the big risk is that you could lose your house or car if you can't make the payments. You've probably gotten one of these offers in the mail -- a credit card with a 0 percent introductory rate that lets you transfer balances from other credit cards.That's an option if you're looking to consolidate your credit card debt. If you can't pay off most or all of your debt by the time the introductory rate expires, you'll be back to paying high interest rates again.

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Some things to ask yourself include: Take the time to do the math where necessary.