Some people then proceed to fill up their credit cards again, now they have double the debt they started with, and they are paying up to 22% on their consolidation loan because they weren't paying attention to the APR when they signed up.
Some consolidation lenders are unscrupulous and make it appear they are eliminating your debt, when you are really taking on more debt. Don't let the lender trick you into thinking that lower monthly payments mean less interest.
Usually car loans, home loans, and other secured personal loans cannot be brought into this type of plan because the bill paying service cannot get banks to relax the interest.
Make sure your bank allows pre-payment and extra principal payments.
What if you Don't Have Enough Equity to Consolidate all Debts But supposing you only have $7,500 equity in your house. You can't, you'll have to choose which accounts to payoff.
The department store and gas card have the highest APR, so shoot for those. There is no reason to borrow more, and you should not either.
Sure you would like to buy down some of the interest with your equity, but if you don't have enough to pay it off and close the account, then there is a very high risk that you'll just run the balance back up again.
You pay more interest when your payments are stretched out to 60 months.
Your debts consist of: gas card with a balance of .0 at 18%Master Card balance of...,000 at 14%VISA balance of............... Your local bank charges 12% interest for home equity loans and has an 0 loan origination fee.,000 at 15.9%, and department store card of ,500 at 22%. Your strategy might be to borrow ,900 with an equity loan from the bank to payoff all your balances, and close out the accounts.Now you'll still owe ,900 but at a lower APR of 12%.Some of these same lenders might even roll the fee into the loan payments.If the loan's APR is higher than your credit cards, you'll lose money and should not close on the loan.A consolidation loan should only be considered if the interest rate is less than all the credit you owe AND you close out all of the accounts you paid off.