Consolidating your debt

You usually work with a debt-relief organization or credit-counseling service.These organizations do not make actual loans; instead, they try to renegotiate the borrower’s current debts with creditors.

Even so, the interest rates are still typically lower than the rates on credit cards. “Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Maryland, and author of “How to Get Out of Debt.” These types of loans don’t erase the original debt; they simply transfer all your loans to a different lender or type of loan.However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same 0 a month, you'll pay roughly one-third of the interest (

Even so, the interest rates are still typically lower than the rates on credit cards. “Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Maryland, and author of “How to Get Out of Debt.” These types of loans don’t erase the original debt; they simply transfer all your loans to a different lender or type of loan.

However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same $750 a month, you'll pay roughly one-third of the interest ($1,820.22), and you will be able to retire your loan five months earlier.

This amounts to a total savings of $7,371.51 ($3,750 for payments and $3,621.51 in interest).

If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay $932.16 a month for 24 months to bring the balance to zero.

This works out to $2,371.84 being paid in interest.

||

Even so, the interest rates are still typically lower than the rates on credit cards. “Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Maryland, and author of “How to Get Out of Debt.” These types of loans don’t erase the original debt; they simply transfer all your loans to a different lender or type of loan.However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same $750 a month, you'll pay roughly one-third of the interest ($1,820.22), and you will be able to retire your loan five months earlier.This amounts to a total savings of $7,371.51 ($3,750 for payments and $3,621.51 in interest).If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay $932.16 a month for 24 months to bring the balance to zero.This works out to $2,371.84 being paid in interest.

,820.22), and you will be able to retire your loan five months earlier.This amounts to a total savings of ,371.51 (,750 for payments and ,621.51 in interest).If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay 2.16 a month for 24 months to bring the balance to zero.This works out to ,371.84 being paid in interest.

Leave a Reply