Consolidating Loans: An Opportunity To Get Your Finances In Order

2007-03-08 10:33:40

( Financial )



Consolidating loans into a single loan can enable you to take control of your finances and have lesser headaches and pressures in the process.

Consider this. If you have two or more loans to keep track of and more than one credit card bills to worry about every month, you can literally be drained of both money and energy. Whereas by consolidating credit card debt, personal loans, overdrafts and/or student loans into a single loan, you can reduce high monthly payments, avoid paying expensive late payment and other penalties and be relieved of financial pressures.

By consolidating loans promptly, you approach your financial problems proactively since you do not allow the situation to further worsen. In fact by doing so, you can save on interest payments and penalty payments and more so, you can reduce your monthly payments, sometimes very significantly. You also avoid court actions and you are able to preserve your credit status.

When consolidating loans, you can opt for a secured or unsecured loan. Secured loan, or one where you have mortgaged your property as collateral for your loan, will allow for a longer period of repayment. Also, interest rates are lower because with the collateral, you give creditor a guaranty of re-payment. The risk for you, however, is that you can lose your property if you fail to pay the loan.

Unsecured or personal loan has higher interest rate than secured loan. This does not require any collateral, though. But only those with good credit history are eligible for the loan.

Consolidating loans is a real help when you carry high balances on your credit cards. Credit cards are like expensive loans. In addition to the high interest rates charged on your credit card bills, you can also be charged with late payment fees, over-the-limit fees and other miscellaneous charges. Consolidating credit card debt can relieve you of these expensive loans together with their add-on costs.

Remember, though, that consolidating loans is not always the right answer or the quick-fix to your financial problems. You may need to reassess yourself. Counseling, especially if you do not have the discipline, have the tendency to overspend, or have poor money management, may be more appropriate in certain cases.


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