Calculating Your Monthly Debt Consolidation Loan PaymentsInk Well Mag February 1, 2017 0 COMMENTS
Debt consolidation involves taking out a new loan that you could use to repay your existing debts. You could use it for paying off other loans and your credit card bills. Borrowers go for debt consolidation in hopes that they’ll have reduced monthly payments to a single source for a predetermined amount of time. This is instead of paying higher amounts to different sources in a significantly shorter amount of time. Prior to taking this route, however, you must calculate how much your debt consolidation would be worth.
Creating a Monthly Budget
This shows the amount of money that comes in and the amount that goes out for paying bills. List all fixed and variable expenses, so you could easily make modifications as needed. Fixed expenses include insurance, car payments, tuition fees, and mortgage payments.
Variable expenses are those that differ in frequency and amount, such as utility bills, medical bills, personal stuff, and entertainment costs. When you calculate these, it’s vital that you use your balance amount as opposed to the amount you pay monthly, advises easytitleloansutah.com and cash loan officers in Ogden. This way, you could better determine the amount you need to consolidate.
Obtaining and Calculating Relevant Information
Ask your lender how much you could consolidate, plus the interest rate and loan term, so that you know the number of your monthly payments. For example, if your lender gives you $6,000 to repay your debts with a loan term of 72 months and 11% interest, add to that all associated fees and taxes plus the length of the loan. From this, you could get a clearer idea of how much money you’ll have to pay off every month.
It’s vital to keep in mind that you should factor in how often your loan compounds interest. This is crucial since when you calculate 11% on your entire loan, it would result in a different answer than when you calculate a loan with compounded interest.