Consolidating school loans interest rates
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Avoid surprises: Before you start, get a handle on your credit scores and get a free copy of your credit reports. This type of credit card charges no interest for a promotional period, often 12 to 18 months, and allows you to transfer all your other credit card balances over to it, usually for a small fee.This method works best if you have a plan to pay off your debt within the 0% promotional period.
A debt management plan typically sets you up to pay off your debt within five years. Counseling agencies are different from debt settlement companies. “If your debt problem is bad enough that you require a debt management plan, then you should also consider making an appointment with a bankruptcy attorney,” says Nerd Wallet personal finance columnist Liz Weston.
You pay the counseling agency, which pays your bills and gets your interest rate reduced or fees waived. Those companies ask you to divert your payments into an account from which they make lump-sum settlements with creditors who haven’t seen a dime in months. “You don’t want to keep struggling with debt that ultimately may not be payable.” Filing for bankruptcy lets you erase your debt and keep some of your possessions, but it typically stays on your credit report for 10 years and affects your ability to get loans or new forms of credit.
Damage to your credit is severe, and personal finance experts and regulators warn against this strategy in the strongest terms. (However, its impact fades over time if you handle new credit responsibly.) In some cases, bankruptcy may be the only long-term option to rebuild your finances.
Many people try debt consolidation, but not all emerge better off.
Some borrowers wind up in worse shape, either because they run up their credit cards again or because their debt remains overwhelming despite the better repayment terms.
Pros: Allows you to manage only one credit card payment at no interest, instead of multiple payments at high interest.
Some cards even accept balances from certain types of non-credit-card debt.
You still may be able to find a personal loan even if your credit history isn’t long or good, but you’ll likely pay higher interest.
You also can borrow against the equity in your home, a retirement account or a life insurance policy.
Ask yourself a few questions to see if debt consolidation is really what you need: Am I serious about paying off my debt?
Consolidation works best as part of a larger plan to become debt-free; it shouldn’t just be a way to buy some breathing room.
If you are consolidating debt just to get a lower interest rate without really knowing how you’re going to pay the debt off, then you are simply moving the problem around instead of facing it.