| Many
people think about debt consolidation in an abstract way and
although it may sound like a good idea they are unsure exactly
what debt consolidation is.
They have
heard that money can be saved by debt consolidation but wonder
just exactly how much can be saved.
Having
the word debt as part of the expression makes clear that it
has something to do with credit or money that has been borrowed.
Consolidation
is obviously the combining of numerous items into the one
single item.
Therefore
when we are talking about debt consolidation it becomes clear
that it is the uniting of different pieces of outstanding
credit into the one payment.
Debt comnsolidation
combines all outstanding financial obligations on such debts
as credit cards, personal loans, hire purchase agreements,
etc. into the one repayment every month.
It is
not possible to state of the top of ones head as to how much
can be saved with debt consolidation, as the savings depend
on how many loans amd credit cards there are how much is owed,
have there been any arrears, the APR and so on.
Credit
cards have interest rates from normally at least 20% and as
such debt consolidation really can save money.
The minimum
payment required for credit cards each month is 3% of the
outstanding balance and if only the minimum payment is made
each month experts reckon that it takes twenty six years to
clear the cards which is rather a sobering thought and a huge
noose to have around ones neck
On credit
card balances of say £30,000 the minimum payment every
month would be £900, and on the balance is fifty thousand
pounds the minimum payment is £1,5001,500 and by paying
these amounts each month the balance on the cards hardly decreases.
The best
methods of carrying out debt consolidation is by either remortgages
or secured loans, known also as homeowner loans, both of which
are excellent ways of paying off high interest credit cards
and personal loans.
Taking
out a secured loan to pay off the above example of credit
card debts shows just how cost effective secured loans are,
as a secured loan of £30,000 taken out over a ten year
repayment period would cost in the region of £400 each
month which is a substantial saving on the credit card debts
costing £900.
Not only
is the saving £Every year for ten years the sum saved
would be £6,000 and at the end of that time the debt
is finished but the credit cards will need paying for another
sixteen years.
Remortgages
can also be used in exactly the same way as secured loans,
and with a remortgage having an even lower interest rate at
from under 2% to the rate of 9% for secured loans the saving
can be even greater by remortgages.
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