If our credit history includes information about late installments, we probably thought about consolidating loans more than once. What exactly is this, often called miraculous, solution? Is it always worth it? Let’s try to determine if credit consolidation is a good choice.
What is loan consolidation?
Loan consolidation is the process of combining several different loans into one larger loan with a lower installment. This is not a free process and we have to take into account some expenses.
First, we will pay a commission on the loan, which is often calculated in hundreds of dollars. Secondly, we have to reckon with the fact that the repayment period will be extended (precisely to provide us with lower monthly installments), which will ultimately pay much more.
In a word, we take out a new loan, using which we pay off our previous debts. A big plus is that we can consolidate both housing loans, cash loans and debt on our credit card. There is freedom here.
Is loan consolidation worth it or not?
As usual, there is no clear answer. Loan consolidation is a good solution when our home budget does not allow repayment of loan installments or loans in the current amount. Then, through consolidation, we can change several installments into one of a lower amount.
However, we must remember that the repayment period will be extended, so the loan will “hang over us” for a much longer period, and the amount we will pay, including all installments and commissions, will prove to be much higher than previous commitments. However, if you are unable to pay our debts, you should think about credit consolidation.
This can be a good way to get out of the financial hole. However, we should remember that there are no two the same situations and we should carefully analyze our current situation, and not just be guided by information obtained in the bank or the Internet. Let’s approach the matter wisely and do not act without thinking.