Consolidation: lower payment, or higher total cost?
The idea: pay off several debts (cards at 60%, SOFOM at 180%, a personal at 40%) with a new loan at a lower CAT and a single monthly bill. The monthly payment drops, yes. The total cost can go up or down — it depends on whether the new term is short or long.
Rule of thumb: if your current weighted-average CAT is higher than the consolidator's CAT, you win. If you stretch the term to double just to «lower» the monthly, you've quietly lost.
And the side effect: the lines you free up — cards especially — sit there with available credit. If you start using them again while paying off the consolidated loan, you end up with the original debt plus the consolidation. This happens more often than people think.
- ✓Typical ticket: 30k–250k pesos
- ✓Common term: 24–60 months
- ✓Target CAT: 32–40% at a bank
- ✓Works when your current CAT is clearly higher