Question about consolidation

[singinjeannie]

Recently, a bank I deal with has called offering me a consolidation loan. This is unsecured with an interest rate of 5.39%, fixed.

I have a LOT of debt which could be consolidated to save us money on our monthly bottom line, but the question is, should I do it?

My estimated outstanding debt is as follows:

LOAN Monthly minimum
CC#1: $ 7500 $ 90.00
CC#2: $16900 $140.00
CC#3: $ 6000 $100.00
Auto: $12,500 $245.00

TOTAL $ 42,900 $579.00 / month

Now this loan would consolidate all but the LOC for a total loan amount
of: $42,500
at 5.39% for 15 years = 344.78/month

This would save us $234.22 each month.
Should I do this or just keep paying the amounts owed individually?

Thanks for the input!
Jean

[vendigirl]

Re: Question about consolidation

Consolidation sounds like a good idea. It may offer you a little more "wiggle room" with the budget. Be sure to know the terms of your loan agreement. If the payback is fairly flexible, it's probably a good idea. That extra $200 a month could go into building up an emergency account over the next few months. After you have that in the bank for some security you could increase your payments on the loan or on the LOC and get further ahead faster. The wrong thing to do is consolidate and then blow that extra money every month, which is what most folks who consolidate do. The benefit of a lower interest loan is to pay less to the lender in the long term than you wold have otherwise. It's important to consider this option carefully.

[terry1156]

Re: Question about consolidation

In your current situation, it seems to be a good idea, especially if yu are only making the minimum payment on the cards at this point. You need to be sure you won't run up the credit cards again. If you do, you just make things worse, which I'm sure you already know.

Before you do, you should sit down and figure out exactly what you will do with the 234.22 you will save. That money should go to paying off debt, not to other things. Building a small emergency account would also be good.

Also ask that all fees are disclosed to you in writing. The last thing you want to do is find there are a lot of hidden fees you never saw or were told about.

It looks like you have been working hard to find areas where you can reduce your debt. Keep up the great work and things will improve.