Increasing Personal Loan Rates Motivate Consumers To Consolidate Debt Now
People are starting to consolidate their debt by taking out personal loan offers with lower rates in order to cope with increasing loan rates. The Wall Street Journal reported that many loan companies are attempting to make up for the recent surge of interest rates by offering more attractive loan packages and rates on new debts clients take on.
The economy is also feeling the effects of higher loan rates as consumers' credit card purchases have been reduced, according to a report from Barclaycard US consumer cards spending fell by six percent last month compared to three months earlier. With fewer loans being made available even after people began consolidating their debts, the demand for personal loan consolidation has also risen dramatically over the past few weeks.
Many loan companies have begun offering new loan packages that include longer loan terms with lower rates. The loan companies are also offering loan applicants new loan rates on existing debts. For example, loan company Lending Club is advertising a 7.7 percent loan rate to people who have outstanding credit card debts of more than $18,000.
More attractive loan packages are being offered because the demand for personal loans is expected to increase over the next few months as high-interest rates continue to rise. "With interest rates continuing their march upward, more Americans will look for ways to consolidate their debt," according to Bruce McClary of non-profit Credit Counseling of NorthWest Texas.
Paying off consumer debts by taking out personal loan offers can be beneficial, but only if the client consolidates all of their outstanding debts into one loan payment. It is generally advisable to only take on as much debt as a client can handle without getting overwhelmed by payments or interest rates, and then continue to pay off the loan with installments. If a loan company offers a loan that's lower than the client's existing debts, it may be advantageous for them to consolidate and transfer those loan balances into one loan and reduce interest payments over time.
"To sum up: Lower interest rates are great news if you can afford to carry more debt at cheaper rates," wrote Peter Render of Innovative Finance. "However, if you have too much debt for your income level, don't fall prey to refinancing tricks."