Does consolidating debts reduce the interest rate?
It’s a fact that individuals are tired of paying loans with high installments and are always looking for an interest rate reduction and wondering if consolidating debts reduces the interest rate. Keep in mind that, it is a very beneficial alternative for your personal finances.
The good news is that, if it is reduced, it is not so easy to keep in mind each month the different payment dates of your loans and credit cards. And it is necessary for you to free up your finances and have an orderly budget.
Lower interest rate when consolidating debts
When you consolidate debts, what you are trying to do is to group all your monthly payments into a single installment. In other words, you can apply for a home equity loan to consolidate existing debts.
This way, you will be able to keep your single payment under control each month, and the most interesting thing is reflected in the payment of a lower installment. This is due to the negotiation of a lower interest rate with a single financial institution.
If you take each of the installments you are paying and add up all the interest you are paying… you will be surprised. When you compare it to what you can pay in interest on a single loan, you save money!
Benefits of consolidating debts
You can consolidate the debts you have with several financial institutions, no matter if they are loans or credit cards. In addition, you will find some benefits detailed below.
- Find the best conditions in the market, in terms of rate, term and amount of the installment. It is not so easy. But if you analyze all the alternatives, you will find it.
- Verify that there are no penalties for early payment of the debt.
- It will be good for you to go from paying many installments on different dates to paying only one monthly installment.
- You will be able to choose among the different types of amortization and decide for the one that best suits you.
- On the other hand, you must be clear that the reduction of the interest rate by consolidating debts does not exempt you from paying an obligation. You are still responsible for a monthly payment, even if it is lower.
I am Nikesh Mehta, owner and writer of this site.
I’m an analytics and digital marketing professional and also love writing on finance and technology industry during my spare time. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business. I can be reached at [email protected] or LinkedIn profile.