3 Things to Know if You’re Considering Applying for Debt Consolidation Loan
You’ve probably heard about debt consolidation loans, but you may be wondering if it’s the right option for you. Today we’ll explore three things to know if you’re considering applying for a debt consolidation loan.
How does debt consolidation work?
A debt consolidation loan allows you to borrow money and pay off a variety of other debts, including things like credit cards, medical bills or personal loans. By rolling these debts under a single debt consolidation loan, you only need to make one monthly payment instead of paying multiple bills on different dates throughout the month.
For example, let’s say you have $10,000 in debt: $5,000 on your Visa, $2,000 on your Mastercard and $3,000 in medical bills. Even if you’re paying the minimum amount on each, you’re still paying three different amounts on three different bills on three different dates each month. Miss even one payment and you’re bound to rack up fees and penalties. Things can get complicated fast!
With a debt consolidation loan, all of these debts are rolled into a single monthly payment, simplifying and streamlining your monthly finances.
Is your debt eligible for consolidation?
The most common types of consolidated debt include credit card bills, medical bills and personal loans. In most instances, a lender will evaluate your credit score, requested loan amount and other financial factors before making a decision. Even if you don’t have a perfect credit history, don’t worry. At World, we always take your whole financial picture into account when determining which products and services are the best fit for you.
What are the pros and cons?
As with anything, there are pros and cons to debt consolidation loans.
- You’ll have one stress-free monthly payment. Simplicity is a wonderful thing, especially when it comes to your money. By consolidating your debt, you’ll make one monthly payment instead of managing the monthly stress of different bills and due dates.
- You may spend less money. We’ll work with you to determine a single set monthly payment that works for your budget. No more worrying about late payments or fees!
- No surprises. With a fixed interest rate, you’ll know exactly how much you’re paying each month and when.
- You may have to pay fees and prepayment penalties. Be sure to check the fine print on any kinds of origination fees (upfront fees at the start of your loan) and if your debts/loans you are consolidating have any prepayment penalties associated with them.
- You may have a higher monthly payment. If you are consolidating debt, you want to keep in mind that if you were paying the minimum amount every month there is a chance your new monthly payment may be higher.
- You may still find yourself with finance problems. Financial wellness is important to continue making sound financial decisions. If you find yourself in a similar situation again it may time to work on your budgeting and other skills.
Wondering if a World debt consolidation loan is right for you? Check out these other articles to learn more.