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Debt Consolidation

Oct 20, 2007
Consolidation loans have fixed interest rates that are based on the weighted average of the interest rates on the loans being consolidated. Ultimately your decision to choose debt consolidation loans or a consumer credit counseling program to consolidate credit card debt, should be based on your own personal financial situation.

The interest rate on a consolidation loan is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8. You can consolidate a consolidation loan only once. A lender can provide a new consolidation loan borrower with the lowest statutory weighted average interest rate for loans by using the lower of the weighted average of the interest rates on the loans being consolidated as of July 1 or the date the lender received the borrower's consolidation loan application. If you have more than three credit statements, a debt consolidation service can help you organize your bills and limit your paperwork to just one single monthly payment. The interest rate on a consolidation loan is based on the weighted average of the interest rates on the loans being consolidated, rounded to the next highest one-eighth of one percent.

There are many reasons why you might want to seek a debt consolidation loan. Debt consolidation comes in several forms, including credit counseling, balance transfers, and debt consolidation loans, so review your options carefully before making a decision. The main purpose of any debt consolidation plan is to help you avoid filing for bankruptcy, to stop the constant phone calls and letters from creditors looking to call in their loans, to lower your debt repayments by up to 50% and to provide you with one low monthly payment that goes towards all your accumulated unsecured debts.

One of the tools that is becoming more popular with those burdened with debt is the idea of debt consolidation. With debt consolidation you can often reduce your outgoings significantly, as the repayment on your consolidation loan is often far lower than the collective repayments on your existing high interest debts. Then compare those amounts with the consolidation loan numbers to make sure it truly is a better choice. You should be very aware that all these programs do is shift your debt - a debt consolidation program does not eliminate your debt.
About the Author
Gordon Warr writes about debt consolidation.
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