A debt consolidation loan may be a good idea if you’re looking to reduce the costs of multiple loans, streamline your repayment process and get on top of your debt.
Personal loans used as debt consolidation loans typically offer better interest rates compared to credit cards and payday loans. For instance, if you have three loans with interest rates above 20%, consolidating debts into one personal loan with a 10% interest rate makes sense.
However, your debt consolidation loan can easily turn into a millstone around your neck. If you take out a variable interest rate loan, and rates start to climb, you could end up worse off. Or if you opt for the maximum repayment time to reduce monthly repayments, you may pay more in interest…