Consolidating debt with a mortgage
There are various personal incentives that make consolidating with a personal loan an attractive option to explore. Paying off your credit card balances with a personal loan could help you save on interest, increase your credit score and change your debt from revolving to installment debt, among other benefits.
Revolving debt is the form of debt that many credit cards use.
Financial situations change all the time, so you might be able to receive a better interest rate on a personal loan than the existing rate on an older line of credit you have.
Let’s say you have ,000 in credit card debt and your card has a 17.99% interest rate/17.99% APR, and you are making the minimum monthly payment.* You recently checked out your debt consolidation options and qualify for a 36-month personal loan with a 12.5% interest rate/15.742% APR.
The second type of debt consolidation you may hear about are debt management plans offered by debt settlement companies.
With these programs, the debt settlement company may be able to secure lower monthly payments with your creditors by negotiating a reduced balance on your accounts.
Even though the debt consolidation company will be making payments on your behalf, you will still be responsible for ensuring those payments are made to your creditors on time.
If the debt consolidation company fails to make a payment on time, the late payment will be reflected on your credit report.
Whether consolidating your debt is a good idea depends on both your personal financial situation and on the type of debt consolidation being considered.By paying off your debt with a personal loan and moving your balance to an installment loan, you could see an increase in your score and the payment plan could help you get out of debt for good (and save in lifetime interest).