Digital News Report – Low rates have prompted more borrowing while tight credit has put a hold on credit card debt. The inability to transfer credit card balances to other cards has prompted an interest in debt consolidation loans.
Online holiday spending broke records this year, up an estimated 12 percent over last year. Americans are looking for ways to lower their payments and at the same time as lower their overall obligation.
While interest rates are at historic lows, some are recommending the consolidation of student loan debt. Deborah Lucas of the Northwestern University says that there are advantages to consolidating student loans right now.
Consolidating student loan debt might make sense for some borrowers, especially if a lower “fixed” rate loan is available. Talk to a professional advisor or counselor before making any decisions with student loan debt.
There are two basic types of debt consolidation loans: Secured and unsecured. Personal unsecured loans are riskier and usually carry a higher interest rate. Chase Bank encourages customers to use their “home’s equity to replace credit card, auto loan and other high-interest debt”.
Many money experts don’t believe it is a good option, but Chase made their case in a recent statement. The bank said that borrowers could lower their outstanding interest rate by 7 to 10 percent or more. Besides writing only one check per month, there may also be tax savings.
The bank offers a calculator to determine overall savings (not including taxes). We input a $5,000 car loan, two credit card loans totaling $3,800, and a few thousand in other miscellaneous loans. The bank said they could lower our payments from $1,173 to $547 a month. Over the 24 month term we would save $1,981.
Always check with a professional advisor before making changes to your outstanding debt.
By Tina Brown