How Does Debt Consolidation Work?

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What Is Debt Consolidation?
How Does Debt Consolidation Work?
How to Consolidate Debt
Does your existing debt have prepayment penalties? If so, you’ll have to subtract those costs from any potential savings debt consolidation might create. Are there fees associated with your potential new loan? These costs also need to be factored in. What would your new monthly payment be and how does that compare with what you currently pay per month? Having a great interest rate won’t help you much if you can’t cover the monthly payment. What is the term of the loan? It’s important to make sure that you’re comfortable with how far into the future you can expect to be making payments. A loan with a lengthy term may have a smaller monthly payment but cost you more in interest in the long run. Finally, will the loan save you money and/or make your debt payments easier? If the answer is yes, you may want to consider taking the loan
Is Debt Consolidation Worth It? Weighing the Pros and Cons
Potential Advantages of Debt Consolidation
Lower Interest Rate
Streamlined Bookkeeping:
Drawbacks of Debt Consolidation
Prepayment Penalties:
Lengthy New Loan Terms:
The Takeaway
SOLC21030
About the Author
Lantern is a product comparison site that makes it easy for individuals to shop for products and compare offers with top lenders. Lantern is owned and operated by SoFi Lending Corp., the digital personal finance company that has helped over one million people get their money right.
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