Common mistakes made while consolidating debt

These loans can be secured or unsecured and have terms typically ranging from 24 to 60 months.

Instead of having to keep track of different due dates and making payments on multiple credit cards throughout the month, you’ll be able to make one quick, easy payment a month that can even be taken out of your checking automatically.This will also help you avoid missed or late payments that can sometimes occur when you have multiple bills to juggle. Before you can determine which is right for your situation you should know what each one is and how it works. Simply put debt consolidation loans are personal loans that will allow you pay off your credit cards and other debts to avoid higher interest rates and fees.Since this lowers the level of risk for the bank or other lender you may be able to get a lower rate on the loan and borrow more money.However it’s important to note that, should you default on your loan, you could lose your collateral.That may sound like a good thing but remember that the entire idea is to get out of debt as soon as possible.

In some cases the terms of your loan will only draw out your debt and perhaps even cost you more money in the long run (even if the interest rate is lower).With a 14.99% APR your monthly payments on a loan would be 9.87 for 36 months, giving you a total payoff of , 715.If you paid that same amount each month on your credit card that held a 20.24% APR you would end up paying ,795 over the course of 40 months.Of course the most common problem with these plans is that you will want to make sure you can pay off the debt before the introductory rate expires and that timeframe can be pretty short.If you miss that window you could find yourself right back where you started as their rates after this period are typically much higher than those on debt consolidation loans.An unsecured loan requires no collateral and these types of loans have become more popular thanks to an influx of online lenders such as Lending Club.