Consolidating Debt:
Making the Right
Choices
Transferring credit balances
to the wrong lower interest loan
can put you in an even worse debt
situation than before. By the same
token, if you choose the wrong debt
consolidation loan, you may cancel
out any benefits of consolidating
at all! With this in mind, knowing
how that you are making the proper
decision for your situation is key,
since when debt consolidation is
done properly, you can save thousands
of dollars.
The secret? Look beyond the interest
rate and any other variables except
total cost. When your payment is
lower, this does not necessarily
mean that you are saving money -
it means you are paying more interest,
because you are "stretching
out" your debt. Similarly,
the lower the percent of the total
balance owed that is required as
a minimum payment, the longer the
debt will last.
Really, when you get right down
to it, there is only one way that
you can truly save money with a
debt consolidation loan: pay off
the debt as quickly as possible.
In other words, pay as little total
interest as possible. If you do
consolidate and end up having a
lower overall monthly payment, plough
that extra cash into paying off
the debt.
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