You might save money if you pay your credit card debt with an installment loan with a lower APR.
The important factor is how long it will take you to repay the loan as compared to the credit card.
One is to consolidate all their credit card payments onto one new credit card – which can be a good idea if the card charges little or no interest for a period of time – or utilize an existing credit card's balance transfer feature (especially if it's offering a special promotion on the transaction).
Home equity loans or home equity lines of credit are another form of consolidation sought by some people, as the interest on this type of loan is deductible for borrowers taxpayers who itemize their deductions.
The repayment amount would be the same, but it would take a year longer.
If the terms of the installment loan require payments over five years (60 months), even at a lower monthly payment, it will cost more than repaying the credit card directly.
Multiply the number of months to repay each account by the payment amount and compare the totals.
For example, if it will take you three years (36 months) to pay off the credit cards making a 0 payment each month, it will cost ,200 to repay the debt.
This simplifies your bill-paying process each month plus reduces the total amount you owe to your creditors.
The first thing to determine is how long it will take you to pay off the credit card at its current interest rate at the payment amount you plan to pay each month.
Then, determine how long it will take to repay the installment loan at the payment amount you will be required to make.
No matter what type of debt consolidation loan option you’re looking into, it is important to understand how to consolidate debt.
The following four steps will walk you through calculating how much debt you have, choosing the debt consolidation loan, setting a timeline to be debt free and teaching you how to control your spending.