If you were to pay off each credit card separately, you would be spending 0 per month for 28 months and you would end up paying a total of around ,441.73 in interest.
This amounts to a total savings of $7,371.52 ($3,750 for payments and $3,621.52 in interest).
Of course, borrowers must have the income and credit worthiness necessary to allow a new lender to offer them at a lower rate.
These loans are usually offered by financial institutions, such as banks and credit unions; there are also specialized debt-consolidation service companies.
There are two broad types of debt consolidation loans: secured and unsecured.
This works out to $2,371.84 being paid in interest.
The monthly savings is 5.21, and over the life of the loan the amount of savings is ,765.04.
Even if the monthly payment stays the same, you can still come out ahead by streamlining your loans.
Say that you currently have three credit cards that charge a 28% APR; they are maxed out at ,000 each and you're spending 0 a month on each card's minimum payment.
They also tend to have higher interest rates and lower qualifying amounts.
Even so, the interest rates are still typically less than the rates on credit cards. “Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Md., and author of “How to Get Out of Debt.” These types of loans don’t erase the debt; they simply transfer all your debts to a different lender or type of loan.
Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt and other types of debt.