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What is a debt consolidation loan? A debt
consolidation loan is a loan you get to pay off other
debts.
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Why does someone get a debt consolidation loan?
There are two common reasons for getting a
debt consolidation loan:
First, you get a debt consolidation loan
because you only want to make one payment each
month, instead of trying to make lots of payments
on many different debts.
If you owe money on four different credit cards,
you might get a credit
card debt consolidation loan, so that instead
of making four payments each month, you only
make one payment each month.
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With a debt consolidation loan, it is easier to manage
your monthly cash flow, since you are only making
one payment each month. Many people who get paid twice
a month find it difficult to budget if they have many
different payments each month, so a debt consolidation
loan makes monthly budgeting much easier, since they
only have one payment per month to worry about.
The second reason for getting a debt
consolidation loan is to reduce the interest
you are paying each month.
Going back to our previous example about
a credit
card debt consolidation loan, if you have four
credit cards and you are paying 19% interest on them,
it may be possible to get a debt
consolidation loan for your credit cards and reduce
the interest you are paying each month.
If you qualify, a bank or other lender
might give you a Debt
Consolidation Loans to repay your credit cards
at a rate of 8% interest. Over an entire year, the
difference between the 19% interest you were paying
on your credit cards, and the 8% you are now paying
on your debt consolidation loan would be 11%,
or $2,200 on $20,000 worth of debt per year.
It's easy to see that by reducing the
interest you are paying, you are now able to repay
your loan much faster than you would be able to repay
all of your credit cards individually.
In this example, a debt consolidation loan
is an excellent way to reduce the amount you are paying,
and repay your debts faster.
To find out if a debt consolidation loan is right for you, check out our FREE
debt consolidation loans calculator, or use our free search tool to search for more debt consolidation loans information:
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