If you currently have multiple outstanding debts, you may be considering taking out a new loan to roll all those debts into one. This is called a debt consolidation loan. Depending on the specifics of your existing debt and of the debt consolidation loans you're considering, consolidating your existing debt may or may not make financial sense.
Why Do People Consolidate Debt?
There are three primary reasons people choose to consolidate debt. The first is to simplify your finances. Dealing with a single loan means you only have to keep track of a single monthly bill, a single interest rate, and a single set of rates and terms. The second reason is to reduce your monthly payments. If the monthly payments for all your current debts are more than you can afford, consolidating your debt into a single loan with a lower monthly payment can make your debt manageable again.
The third reason many people take out debt consolidation loans is to save money on interest. When a debt consolidation loan offers a lower interest rate than some or all of your current debts, it has the potential to reduce the amount of interest you will end up paying. However, you’ll need to consider the duration of the loan as well as the interest rate to determine whether your total amount repayable will be more or less. Remember that the longer the duration of the loan, the more interest you will pay in total.
Who Offers Debt Consolidation Loans?
You can apply for debt consolidation loans with various types of lenders. Many banks, credit unions, peer-to-peer lending companies and finance companies (including debt consolidation companies) offer loans for debt consolidation. The particular terms of these loans vary depending on the lender, your state of residence, and your particular financial circumstances.
Debt consolidation loans can take the form of a personal loan or a line of credit (including credit cards). The loan can be either unsecured, where your signature is the only guarantee of repayment, or secured, where you offer collateral as a guarantee of repayment.
A Note About NetCredit
NetCredit provides loans up to $10,000, repayable in predictable installments over time. Your interest rate will remain constant for the life of the loan, so you know upfront exactly what it will cost. You’ll be able to use our My RightFit Tool™ to tailor your loan to your own specific needs, and you’ll build your credit over time when you make timely repayments. If approved, you’ll typically receive funds by the next business day. As an unsecured personal loan, you can use your funds for any purpose you choose, including making your various expenses more manageable.
Though there are many factors to consider, a debt consolidation loan can offer clear benefits under the right circumstances.
Turn multiple debts into a single loan with a single monthly payment.
Reduce your monthly payments to an amount that’s manageable for you.
Save money over time by consolidating debts into a lower-interest loan.