Best rates for consolidating college loans

For some people, it’s a smart choice that gets your debts organized while potentially lowering your monthly payments. When you take out a personal loan for debt consolidation, you receive funds to pay off all of your existing debt, like your credit card balances and high-interest loans.

You then make a single payment to your lender, rather than having to make multiple payments each month.

You might also prefer a debt consolidation loan because it streamlines your monthly payments.

We talked about the total cost of the loan, which needs to be reviewed holistically, not just as a monthly payment. First, most lenders charge some sort of fee when you take out a new loan.

The most common is an origination fee, typically charged as a percentage of the total loan amount.

Because interest rates on credit cards are so high, it’s possible that you can find a lower rate on a debt consolidation loan instead. However, your actual rate depends on a number of factors, especially your credit score.

It’s important to compare interest rates and total cost of the loan to your current payments to make sure you don’t end up paying more over time.

This also contributes to building healthy credit because it lowers your chance of having a late payment.

In some cases, a debt consolidation loan might not be a great idea.

But if you habitually spend more than you earn and are still incurring new debt, then no debt consolidation loan is going to help you in the long run.

If this sounds like you, try to figure out how you can curb your spending to stop accruing more debt.

So if you need a ,000 loan and there is a 4% origination fee, you’ll only actually receive ,600. Even if the monthly payments look good on paper, you may be paying a lot more over an extended payment period.

You can use the APR to compare interest rates and fees, but you also need to consider how much you’ll spend on interest over the entire loan term.

Finally, a debt consolidation loan doesn’t necessarily fix the root problem of your debt.

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