Debt consolidating loan finance

Individuals usually work with a debt-relief organization or credit-counseling service.These organizations do not make actual loans; instead, they try to renegotiate the borrower’s current debts with creditors.) Freeman says that debt consolidation loans are most helpful for those who have multiple debts, owe ,000 or more, are receiving frequent calls or letters from collection agencies, have accounts with high interest rates or monthly payments, are having difficulty making payments or are unable to negotiate lower interest rates on loans.There are also several consolidation options available from the federal government for those with student loans.Theoretically, debt consolidation is any use of one form of financing to pay off other debts.Even if the monthly payment stays the same, you can still come out ahead by streamlining your loans.Say that you currently have three credit cards that charge a 28% APR; they are maxed out at ,000 each and you're spending 0 a month on each card's minimum payment.This works out to ,371.84 being paid in interest.

For example, say an individual with three credit cards and a total of ,000 owing at a 22.99% annual rate compounded monthly needs to pay 47.37 a month for 24 months to bring the balances to zero.Secured loans are backed by an asset of the borrower’s, such as a house or a car, that works as collateral for the loan.More traditional, unsecured debt consolidation loans, which are not backed by assets, can be more difficult to obtain.This works out to 36.88 being paid in interest alone.If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay 2.16 a month for 24 months to bring the balance to zero.

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