Pros and Cons of Consolidation Loan Options

Before stepping into a consolidation loan, you need to consider all your options on pros and cons so that you can find the best choice to suit your current situation.

Credit Card Balance Transfer

-Balance transfer comes with a very low rate, such as 4% for a set period.

-All your credit card balance can be consolidated into one card for an easy payment.

Disadvantage

-There could be a balance transfer fee for debt consolidation.

-The interest rate can jump dramatically after a set period finishes. You will face a higher payment if you are unable to clear your balance.

-Qualifying criteria could be strict as it is unsecured debts.

Home Equity Loans

-Interest rate is much lower than the rate on credit card and other personal loans.

-The interest is likely to be tax deductible.

-Monthly payment could be comfortale towwards your budget as the term of home equity loan can be stretched longer than personal loans.

Disadvantage

-The loan is secured by your home. So any failure to meet loan payment could lose your house.

-Total cost of interest may be more as home equity loans normally have longer term than personal loans.

Personal Loans

-The interest rate is usually lower than you would pay with credit card.

-A personal loan is esay to obtain.

Disadvantage

-As a personal is an unsecured loan, the interest rate is higher than a home equity loan.

-The overall cost of the loan could be higher since interest is high.

Car Loans

-Interest rate is ususally lower than personal loans as you use your car as a collateral.

-Car loan is easy to obtain.

Disadvantage

-You may lose the ownership of your car if you are unable to meet your obligations.


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