Seniors can benefit from consolidating two or more loans under certain conditions. Loan consolidation may seem like a complicated financial term at first glance, but it is easy to understand when you grasp the basic concept. For example, if you have two or more loans, each loan will have a different interest rate. This rate is determined by the lender. The loan consolidation option is based on the idea that combining multiple loans into a single loans can dramatically reduce your monthly payment. This is likely if the new interest rate is significantly lower than the previous interest rates.
Reasons For Loan Consolidation
Senior citizens may have a variety of reasons for pursuing loan consolidation services. Many seniors diligently plan for retirement, but it is easy to fall behind after experiencing only one medical emergency. As a group, seniors are very good at saving money, but they are also compelled to spend a disproportionate amount of money on medical expenses. It is also difficult to plan for other situations that may arise unexpectedly, and debt consolidation offers a method to free up money that might be disappearing to pay off high interest rates on multiple loans.
Although there are many reasons for seniors to consider consolidating their loans, here are the top three:
- Difficulty paying bills on a fixed income is a common reason for seniors to consider debt consolidation services.
- Seniors who are considering taking out a reverse mortgage loan may wish to consolidate existing loans before pursuing this option. This can provide the reverse mortgage loan provider with the impression that existing financial obligations are in good standing.
- Reducing the interest rates on debts through consolidation is an attractive option for seniors. After consolidating multiple loans under one provider, the total monthly payment can decrease substantially. This allows seniors to generate additional cash through the consolidation process, but this only works if the aggregate interest rate on the consolidated loan is lower than the separate rates on previous loans.
Selecting a Loan Consolidation Company
Seniors should be careful when speaking with any company that performs loan consolidation services. Although loan consolidation can solve certain kinds of problems, this is no time to rush to the first provider you find online. Always perform your due diligence by researching the company. Find out if they have a good reputation with people you trust.
Remember to guard your privacy while you are online looking for information about debt consolidation services as well. You may receive an email in your inbox based on previous browsing patterns or your affiliations. Always protect your personal information by refraining from clicking on any debt consolidation advertisement that shows up in your email box. If you are going to use the link because you think it is coming from a trusted source, just copy and paste it into the URL at the top of your browser’s page.
AARP’s Loan Consolidation Calculator
If you decide that you want to consolidate your loans, try the free loan consolidation calculator provided by American Association for Retired Persons, or AARP. This is a unique type of tool, and it allows you to enter different amounts that may apply to your situation. You can compare different types of loan consolidation offers, and this can help you to make an informed decision.
Assuming that you have a total loan balance of $5,000, and the interest rate is set at 11 percent over a 10-year period, your consolidated loan balance will be $69.
This same amount would be $200 if you decided not to consolidate the loans.
In this case, there would be a substantial advantage to consolidating the loans.
The savings you get from consolidating loans can help you to cover other expenses, so review this option periodically. If you get stuck in a financial pinch, you may find that the loan consolidation option can help with sudden medical bills or payments. For additional information on consolidating your loans as a senior, follow the links in this article. Every situation is unique, so it is important to find the right solution that fits your needs.