Many Different Loans
When you have several different loans and loan sources, there are a wide variety of problems that can occur. For starters, very few loans have the same payment date. Some are due monthly, others are due bimonthly, and still others are due every quarter. Some may be due on the 25th of the month, others the 1st, and so on. Keeping track of when each loan is due is difficult, and not only is it a tremendous inconvenience but it can cause several additional problems as well:
• No matter how good your credit is or how much money you make, all lenders know that the more sources of loans and credit you owe, the harder it is to pay back. Even if you are highly paid, if you have a number of credit sources, the likelihood you are going to miss a payment is far higher simply because you forgot - not because you were unable to pay the loan back . As such, your credit score is negatively affected by having so many different sources of credit, simply because you automatically lose points due to being at a higher risk.
• Missing a single payment on one loan can have some severe consequences. Not only can it harm your credit score, but most creditors have clauses that say if you miss a payment they can boost your interest rate up dramatically, costing you thousands more over the lifespan of the loan. If you miss just one payment because you were disorganized, the amount you may be paying for it can easily be significant.
Getting a consolidation loan in this case is one of the few ways you can make sure that you will be able to make these payments, because the single loan will be due on a single date every month, and you will be unlikely to miss a payment due to disorganization.
Single Loan at High Interest
People make mistakes. It is possible that your credit was bad, you missed a payment, or you did not research your loans enough, but whatever the reason it is easily possible to find yourself owing a substantial amount in interest to a lender. If you have good credit, you can take out a consolidation loan with a reputable lender and even though the loan amount is still the same, as are the credit terms and payment dates, the amount you save in interest will add up to a great deal of money over time.