It's that time of year where people are drowning in debt.
At this time of year, it seems that everyone is thinking about debt. How much they racked up over Christmas, what they would like to get rid of and New Year's resolutions to pay it down.
Many lenders have tapped into that this year and I've noticed a flurry of
advertisements for debt consolidation loans. It's easy to see why this is tempting. When you owe a lot of money all over the place, one of the most stressful aspects is seeing the variety of payments shooting out of your account and trying to keep track of what's due, when.
Rolling them into one payment a month makes sense.
But there are some things to look out for. It's important that you understand what term your loans are currently on and the interest rate you're paying. You should never take a debt consolidation loan that gives you a higher interest rate than what you're already paying.
It's preferable it does not extend the term either, unless it's at a significantly lower interest rate or if its interest fee. Even a low interest rate can mean a big bill over a long term because the impact of compounding or possibly because of high yearly admin or account fees.
