Juggling Loans and Clearing Debt
It may seem like an ideal solution but juggling loans and clearing debt are not ideal financial partners. There are times when transferring loans can have its benefits and can actually save the borrower money. However, long term juggling of loans is not a good idea to clearing debt.
Juggling Loans and DebtJuggling loans means taking on one loan to pay off another and for many borrowers it can become a way of life. In many cases juggling loans simply means prolonging the loan, and can be especially problematic if the original loan is not paid from the new loan. By doing this the borrower will be left with multiple loan repayments each months.
Juggling Loans and Lender ChargesApart from the actual repayments on multiple loans the lender can be hit with massive charges each month. One late or missed payment on one loan may not be too much of a problem but with multiple loans the charges can escalate. The borrower will not only need to pay back these charges every time they occur, but also pay escalating interest fees, and this is when serious problems can occur.
Transferring LoansIn some circumstances transferring or switching loans will be the smart thing to do. If the borrower can find a loan with cheaper interest rates then it will be wise to transfer over the loan. However, borrowers should remember that lenders may apply early loan repayment charges, and the earlier the loan is paid the higher the charges can be.
Your Credit History and Juggling LoansAnother major reason to avoid juggling loans can be the effect it will have on a borrower’s credit history. Juggling multiple loans will leave footprints all over a borrower’s credit reference giving the appearance that the borrower is over committed. Any missed or late payments will also appear on the credit record, and these footprints can make the borrower look like a very bad credit risk.
Juggling Loans and Clearing DebtIt will be very hard to clear debts if the borrower is juggling a number of loans. Multiple loan repayments will leave very little disposable income to make extra repayments. If the loans have been paid for quite a while then there is always the temptation to borrow again. Borrowing from a number of sources will never be a good long term debt solution and should be avoided.
Clearing Debts and Consolidation LoansBorrowers should always look for other options to clearing debt instead of juggling loans. Taking on multiple loans may look like a nice solution to clearing debt but they will only add to the problem in the long run. If the borrower is considering taking another loan then they should consider a consolidation loan as the last loan option.
By taking a consolidation loan borrowers will be able to clear all existing debts and only have one loan repayment to make. Consolidation loans will also have the benefit of eliminating all interest payments from the other multiple loans. Borrowers should always shop around and find the best consolidation loan they can with the lowest interest rates.
The Effects of Juggling LoansApart from the financial stresses of juggling loans there are other consequences to the borrower. Debts are a very real cause of stress, and are one of the major reasons for relationships breaking down and illness occurring. There may be some very valid reasons why a borrower is juggling loans but there are also some very serious consequences to this type of borrowing.
Juggling loans to clear debt is never a very realistic option. Taking on more debt will not help clear debt but can lead to very serious debt problems. Borrowers should always look at other options before taking on multiple loans. The only person that will benefit from a borrower juggling loans will be the lenders that have supplied the loans.