Debt Consolidation Loan
Debt consolidation loan is a loan that combines multiple debt obligations into one single loan. These loans tend to have lower interest rates than many of the existing debts. They also allow the borrower to make only one payment per month instead of many. These loans are generally available from banks, credit unions, and other financial institutions. Let’s compare the advantages and disadvantages. Potential Advantages Pays off high-interest credit cards or other debts with low-interest loans. One easy monthly payment to make. A closed-end loan will result in a set payment schedule (payments and length of the loan are pre-determined). May result in lower overall monthly payments. Establishes good credit history, if paid back as agreed. Potential Disadvantages Some type of collateral may be required before approval. A co-signor on the loan may be required before approval. Credit score will be a significant factor before approval. No ongoing financial education or coaching is provided.