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If you own a home or other valued property that you can use as collateral, lenders may be more likely to offer you lower payments and interest rates.
But remember: If you use your property as collateral, you risk losing it if you fail to repay the loan.
Some debt consolidation options offer low introductory rates to encourage customers to transfer high-rate balances, but these rates can skyrocket after the introductory period ends. Debt consolidation loans may also require that you pay your debt off over a specified amount of time.
Others offer variable rates, which rise and fall with specific market indicators, such as the U. Be sure to understand the terms of the loan you are considering before you take the next steps.
Conversely, making minimum payments on credit cards could mean months or years before they’re paid off, all while accruing more interest than the initial principal.
Readers also ask Consolidate your debt if you can get a loan at better terms and/or it will help you make payments on time.
Here’s a scenario when consolidation makes sense: Say you have four credit cards with interest rates ranging from 18.99% to 24.99%.
Just make sure this consolidation is part of a larger plan to get out of debt and you don’t run up new balances on the cards you’ve consolidated. Debt consolidation can help your credit if you make on-time payments or consolidating shrinks your credit card balances.
Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.
Instead of paying several minimum monthly payments on a number of bills, this repayment strategy involves getting a new loan to combine and cover your other loans or debts.
You can then repay all of your debts with one monthly payment.
If you’re dealing with a manageable amount of debt and just want to reorganize multiple bills with different interest rates, payments and due dates, debt consolidation is a sound approach you can tackle on your own.