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Pros and Cons of Consolidation Small Cash Loans
There are times that your borrowing will get on top of you. It can feel like there is no way out and you start looking for debt consolidation to get you out. If you have a number of small cash loans, debt consolidation could be the way out. There are advantages to opting for this but at the same time there are a number of risks to opting for this.
The main benefit is that you can pay one monthly repayment to one company. All of your separate small cash loans will have been paid off with the amount of the loan. This monthly repayment can be decided and agreed upon between you and the lender. You will usually find that this monthly repayment is less than the amount that you are paying for the separate small cash loans but you are still paying off the debts quicker.
The question is how you are paying the debts of the small cash loans quicker when the monthly amount is smaller. The answer to this is the interest rate. The rates of interest for personal and long term loans are much smaller than those for small cash loans. The interest rates will also be locked in and you will be made aware of the amount that you will need to pay at the end of your term for the loan.
The loan term will also be agreed upon so you will know how long it will take you to get out of debt. This term is something that you can change before signing for the money, depending on whether you will have more money spare or whether you will struggle to make the monthly repayments. By setting the term, you will know when you will get out of debt, which is a struggle for many people that are struggling with their small cash loans.
The problem with debt consolidation is that you need to state why you want the loan. When you say that it is for the consolidation of your small cash loans, that will be noted on your credit report. This can make you look like a risk to many lenders because they will start to think that you always need help to get out of debt.
Of course, this damage is much less than if you kept struggling with the small cash loans. As the debts rack up with the small cash loans, you may also start thinking that the only way out is to opt for bankruptcy, which will harm your credit rating even more.
Another downside of debt consolidation of small cash loans is your credit rating. The loans will have already damaged your report and you may struggle to get the long term loan that you need. You will definitely not get the lowest interest rates that are available; those are for people with have a very good credit rating. You may find that you have to opt for home equity loans rather than unsecured loans.