If you have multiple streams of debt, like high-interest credit cards, medical bills or personal loans, debt consolidation can combine them into one fixed monthly payment.
Getting a debt consolidation loan or using a balance transfer credit card can make sense if it lowers your annual percentage rate. But refinancing debt has pros and cons even at a lower rate.
Pros of debt consolidation
You could receive a lower rate
The biggest advantage of debt consolidation is paying off your debt at a lower interest rate, which saves money and could eliminate the debt faster.
For example, if you have $9,000 in total debt with a combined APR of 25% and a combined monthly payment of $500, youll pay $2,500 in interest over about two years.
But if y…
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