Debt Consolidation Help: Borrow from Peter to Pay Paul (cont.)
Contributed by Deb Powers
To give you an idea of how much you can lower your monthly payments, I visited the loan calculator at http://www.savvy-discounts.com/calculate/credit_card/debt_consolidation2.html and entered the following (totally fictitious) information.
Current credit card debt: $31,000.00 Current effective interest rate (on the average of three credit cards with varying rates) 18.9%. Current monthly payments: $561.75.
Based on a ten-year fixed rate debt consolidation loan at 8.5% of $31,000 and $2300 in closing costs, my new monthly payment would be $412.87, a reduction of almost $150 a month.
A debt consolidation loan can help pay off your debt faster.
Suppose in that same scenario I presented above, I chose to continue paying the same monthly amount as I was before. If I managed to avoid incurring further debt while paying off the loan, I could be totally debt-free in 6 and a half years. By doing it that way, you also save over $6,000 in interest over the life of the loan.
If you find yourself in debt that you just can't see a way out of, your best option may be to seek the help of a non-profit credit repair organization. A credit counselor can help you consolidate your loans, and make one monthly payment, while learning better spending habits.
