Finance

Jul 22 2017

Debt Consolidation? USAA Member Community #calculate #loan #payment


#consolidation loan rates
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Financial Advice Q in the right hands it can do a lot of good, but if used incorrectly, it’s pretty dangerous.” So the question is, are yours the right hands or the dangerous ones? Here are a couple points to help you decide:

Behaviors and Mindsets

First and foremost, you generally shouldn’t consolidate your debt until or unless you’ve fixed the behaviors and mindsets that caused you to end up with a bunch of debt in the first place. It sounds like you’re on the right track here but don’t underestimate the importance of this. If you don’t get an emergency fund in place (ultimately shoot for 3-6 months’ worth of your committed expenses) or you don’t stick to your budget, it’s typically just a matter of time before you find yourself with even more debt – the consolidation loan and new debt that will arise due to continued overspending and not having money in the bank.

Interest Costs and Repayment Terms

The next thing you want to look at is the interest costs of the debt you currently have versus what it will cost to consolidate. For example, let’s say you have 2 years left on a 5 year car loan at 4.9% interest and you have the opportunity to consolidate it into a loan at 7% with a 5 year repayment term. This probably wouldn’t be a good idea since you would be increasing the interest rate and the term of the loan. Generally, I’m in favor of consolidating debts only if it results in you paying less interest over time.

One last thing, I’d encourage you to temper your expectations about being able to get a consolidation loan for this amount. You might have trouble finding a bank willing to lend you that much, but it might still be a good idea to try. It’s hard to know the right answer here in advance but the good news is you’ll have a lot of influence over how it turns out with either choice.

Thank you so much for your question. I hope this helps and I wish you all the best!


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