If you are attempting to reduce your debt, one step that you have most likely considered is consolidating all your current debts into a single payment at a lower interest rate. While consolidation to reduce the amount you pay on the debts makes sense, it's important to take care regarding any fees associated with debt consolidation. As with all personal finance matters, it’s essential to do the math to make sure that any fees involved with consolidating your debt don’t completely negate the gains you'd receive from the lower interest rates.
Just as you should be double checking or triple checking your budget, looking for another dollar to squeeze out each month so that you can use to pay down your debt, you need to research the debt consolidation benefits with the same intensity. You are shooting your debt reduction plans in the foot if you are not being as diligent when you check on your consolidation method. The fact of the matter is that these transfer fees are how some so-called debt consolidation loans or debt consolidation plans are profitable to the advisors or institutions that offer them. As nice as these people or places may seem to be, remember that they are in business to capitalize on the fact that many people are in debt too deep and need help to get out - (Avoiding Debt Consolidation Fees).
It’s important to remember that a lower monthly payment does not necessarily mean you’re saving money. This is especially true if the length of the loan has been extended. While the exercise of doing the math may seem a bit daunting at first, it’s an excellent exercise that will help you in other aspects of your personal finances down the road.
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Debt Reduction 101
Debt Consolidation Fees
