are bill consolidation loans a good idea?
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Whether consolidating your debt is a good idea depends on both your personal financial situation and on the type of debt consolidation being considered. Consolidating debt with a loan could reduce your monthly payments and provide near term relief, but a lengthier term could mean paying more in total interest.
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Personal loans are not always bad. If you work with a reputable lender, use the loan for the right reasons and can commit to paying it back, then a personal loan can be a smart option.
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Consolidation loans can be a good way of getting on top of your debt, but they aren't right for everyone. If you only have a few debts, and if they already have attractive APR, it might be worth concentrating on paying them off as they are – especially if you are organised enough to keep on top of them each month.
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One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.
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If you are struggling to keep up with your monthly payments, consolidating your debt in this way can certainly help alleviate financial stress. It can also make it less likely that you will fall behind on your payments and risk harming your credit.
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It can sometimes be useful to keep some bills so you can go back over them and compare charges and fees. A good rule of thumb is to keep any bills that you may want to review at a later date for 12 – 24 months.
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This is a good time to get an affordable loan, which can smooth over hard times, lower the cost of existing debt and make your life work better. The trick is to secure the type of loan that best fits your needs and your credit standing at the best possible price and with the least risk.
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According to experts, it might not be much. Having an app to create a budget and track purchases seems like a good idea, but experts say simply downloading and having constant access to an app won't necessarily result in better money management or increased savings. "The apps work.
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Debt consolidation can help your credit if you make on-time payments or consolidating shrinks your credit card balances. Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.
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Interest rates can also be low, particularly if you have good credit, making personal loans a good way to consolidate and pay off credit card debt. Other good reasons to use a personal loan include paying for emergency expenses or remodeling your home. However, personal loans are not a good idea for everyone.
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Conventional loans could offer you more flexibility and save you some money in monthly payments if you meet the credit and income qualifications. Government loans, on the other hand, are great for lower income borrowers with relatively lower credit scores because they increase accessibility to home ownership.
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Get Personal Loan Rates The average annual percentage rate (APR) on a debt consolidation loan is around 18.56%. To put that into perspective, the average range of interest rates charged on debt consolidation loans typically falls between 8.31% and 28.81%.
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But many “debt consolidation companies” actually sell a more controversial product: debt settlement. For most consumers, debt settlement is a risky option. It should be considered only after you've exhausted alternatives. It's costly, it can severely damage your credit and any savings can take years to realize.
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Debt management is usually a good option for people overwhelmed by unsecured debt like credit cards, medical bills and other kinds of debts that don't involve collateral. So, for example, if you're struggling to pay your mortgage or car loan, a debt management plan probably isn't going to be your best option.
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Looking for a legitimate debt consolidation agency is a good idea, as there are some debt consolidators that are less than trustworthy. ... A legitimate debt consolidation company will have a good reputation, a long history of serving consumers and won't charge an arm and a leg to help you pay off your debt.
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A personal loan used to consolidate debt can result in simpler money management and a lower interest rate, which will save you money on interest payments. However, not everyone will save by consolidating credit cards with a personal loan. Or the savings might be so small that the payoff simply isn't worth the hassle.
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A home equity loan can offer a lump sum of funding you could use to pay off or consolidate credit cards or other debts. ... On paper, using home equity to pay off debt seems like a good idea since you're able to tap into funding at an affordable, low-interest rate and streamline your monthly payments.