Consolidating fixed loans
Check for Prepayment Penalties Before signing on the dotted line to consolidate your debt you should look into a few more things.
Some lenders charge a prepayment penalty on their loan products.
Another con to debt consolidation is that it often extends the debt repayment term.
If you’re only a few months or a year away from paying off a loan but you consolidate it with other debt you could add another two to three years to your repayment period.
This is because when you pay off a loan early they’re not making as much money on it as they had planned.
The prepayment penalty helps them make up some of that lost profit.
After a while you may find yourself with multiple loan payments to juggle every month.
If you’re a small business owner struggling to make payments on credit cards and loans you might have been wondering if consolidating your debt would be a good idea.
Debt consolidation companies often target those with high balances, sending letters and calling with promises to lower your monthly payments and save you money.
When you’re shopping around for a debt consolidation loan make sure that your lender is offering a fixed-rate product.
If you consolidate debt into a variable rate product, such as another credit card with a lower interest rate, you could run into trouble.