Would it make sense to consolidate outstanding loans right now or should I wait a bit more?
Rates are pretty low - should I consolidate my loans here or will we see lower rates still?
Answers
1130 points
sundarkambam answered 9 months ago …
Tomorrow's Fed meeting is expected to cut the interest rate by 50 to 75 basis points.
Till that time ,have a look at the following article.
It is a very useful one...
Link:http://seotraffictips.blogspot.com/2008/03/is-debt-consolidation-right-choice-for.html
By William Blake
The process of debt consolidation allows a number of smaller bills to be rolled into one payment that is made monthly. The result is a lower payment and usually a reduced interest rate. For this to happen, a variety of debts are consolidated, which might include medical bills, dental bills, credit card bills, or other types of unsecured loans. With debt consolidation, your finances have become easier.
Keep in mind that for debt consolidation, another option is to reduce interest and monthly payments on credit card bills but only by getting a secured loan. Of course, the actual process for debt consolidation, as well as the options offered, will depend on the institution with which you work. Even so, who are the people that would benefit from debt consolidation?
Now that you know what debt consolidation means, how can you tell If you should consider consolidating your bills? Here are some questions to consider when making the decision to consolidate.
Are you currently making timely payments on all of your debts? If you can easily make the minimums on the credit cards and monthly payments on all of your debt, then debt consolidation may not be for you. Then again, if it is possible to lower your interest rates, wouldn't it be nice to stash some cash back in your wallet? Debt consolidation isn't just for individuals and families who are behind or barely scraping by with the bills. It can also be a valuable way to get out of debt quickly and easily.
Ask yourself if you have any money left over for entertainment, dinner, or meeting up with friends after you pay your debt. We all know that money cannot be spent freely for a long time before debt starts catching up. One thing that many people overlook is providing a place in the budget for fun. You need to have an outlet and without one, the risk of overspending and impulse buying increases.
You need to pay your bills but you also need to understand all of your expenses, compared with your income. With this information, a good budget can be created, showing you whether debt consolidation might work in your case.
Are interest rates dropping? Another reason to consider debt consolidation is the interest rates. If interest rates are dropping, it may be advisable for you to consolidate debt. Regardless of your budget and ability to pay more than the minimum payments, if it is possible to secure a great interest rate, then by all means, go for it.
Most consumers would highly benefit from a debt consolidation. We suggest you start by analyzing your current financial situation, along with the interest rates being paid. The more you know about your finances the better chance you have of making changes. Of course, if you discover that a debt consolidation loan is a poor choice at this particular time, you can always re-evaluate your situation in six months to a year to see if it would work better then.
132 points
BigChris answered 9 months ago …
Any time you reduce your debt, it's a guarnateed profit. If you are paying interest you are paying out money. If you are only paying 5%, if you pay that debt, you will be buying a bond that pays 5%. I'm sure that deep in your heart, you already knew this answer. Pay down debt.
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698 points
7million7years answered 9 months ago …
Yes, my concern about debt consolidation is that you can inadvertently EXTEND the time to repay ... depending upon the terms that you accept.
Here's how to have your cake and eat it:
1. Calculate all of your current minimum monthly payments at the current rate/s of interest
2. Calculate how much on top of 1. you could afford to add EVERY MONTH WITHOUT FAIL to help pay these off
3. Consolidate the loans to get the benefit of the lower interest rate (have you factored in the fees?)
4. Pay off your Consolidated Debt using the amount of money allocated in 1. + 2.
5. Swear off all new debt (except for your own home and/or investments)
6. When the loan is paid off keep paying YOURSELF (i.e. into your Investment Plan) the amount of money allocated in 1. + 2.
... combined with the lower interest rates this plan should not only pay of your debt as quickly as possible, but set you up with GOOD FINANCIAL HABITS that could help set you up for life.
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