Loans that are too piled up make you dizzy yourself. You will find it hard to determine which payment should take precedence. There are ways to make payments easier to control, namely by debt consolidation. What is meant by debt consolidation and what must be prepared before consolidating your debts? We will provide an explanation.
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Debt consolidation is a combination of several loans into one large loan. Debt consolidation allows people with multiple debts to combine all high-interest loans into one larger loan offering a relatively lower interest rate. So that the more loans, the lower the interest rate charged on the loan. Debt consolidation is useful as savings when paying interest. In essence, consolidating all your debts into a single debt will make it easier for you to manage transactions through one monthly payment.
Steps that must be considered before consolidating debt?
• Creating a healthy financial lifestyle by knowing the size of all loans the number of monthly payments, the length of the loan ends. You can record all loans that must be repaid-with their respective details. This method will make it easier for you to manage transactions in monthly payments while determining whether it needs to be consolidated or not.
• Compare total debt with the income you have. After recording all loans and your net income, the results will be visible. What percentage of income should be used to pay off debt? If you still have enough funds to support your needs in a month then there is no harm in consolidating your debts.
• Approaching different banks and comparing each of the interest rates offered, product offers, terms, and conditions. Use a comparison site to speed up this process. Recall your goal to consolidate is to get a lower interest rate. Don’t forget to consider other factors such as the convenience and flexibility of loan payments.
In essence, before you direct all personal loans into debt consolidation, remember that this method is not the main solution to your debt. Consolidation is the incorporation of all your debts into one container. If your current monthly payment under a debt consolidation loan appears smaller, it can happen because the loan period is longer, which means you can potentially pay more interest than before.