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To figure out whether or not this is a good idea you need to see if you will really be saving money or if the debt consolidator is taking you to the cleaners for more money than you would be paying if you continued paying your loans. To do this you need to use a debt consolidation calculator of which there are several available online. With the calculator you can enter the amount you owe, the annual percentage rate and the monthly payment you make, at which point it will calculate what your total payoff is. You can then compare this to the loan that you are being offered and see if you will really be saving any money at all. This is because the calculator will show you exactly how much you will have paid by the time all of your loans are paid off so that you can compare it to the payoff amount on the consolidation loan, in some cases the savings can be significant, but generally speaking the difference are only a small amount and in rare cases you could actually end up paying more money with the new loan, so it pays to check everything out before you sign the papers. If you have suffered a major reduction in your income you may want to consider an IVA debt consolidation program instead. With this program you seek out the services of an IVA debt consolidation advisor or a legally qualified insolvency practitioner or IP. The IP will take a look at you income and expenses and help you figure out what you can actually afford to pay out against your outstanding debt. At this point he will contact all of your creditors and discuss arrangements with them to make sure that each of is paid a percentage of what you can afford every month based on how big their portion of your total debt is. Usually the IP will also renegotiate the interest that you are paying on your debt often reducing it by as much as 70%. Thus your total debt is instantly cut by two thirds of the original payoff amount. You should be aware though that this is a legally binding contract and should pay off your debt within 5 or 6 years. Of the two choices this is the one that will do the most to repair you credit and most banks will loan you money again after the debts are paid in full. If you already struggling under more debt than you can handle, the last thing you need is to take out another loan that will leave you worse off than you already are. Make sure the debt collectors you are dealing with will actually reduce your monthly payment and your payoff amount before you sign any contracts. If you can you make arrangements for an IVA or Individual Voluntary Arrangement you are in most cases going to be much better off. |
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