Maria is trying to decide whether she should consolidate her 3 personal loans in
ID: 2646397 • Letter: M
Question
Maria is trying to decide whether she should consolidate her 3 personal loans into one loan. The credit union is currently offering her 7% for a consolidation loan. The three she currently has have three different rates. Her loan with M&T is at 6% and has a balance of $10,000; Her loan with WSFS is at 11% and has balance of $6,000; Her loan with Americas Bank is at 8% and has a balance of $25,000 for a total of $41,000 in loans. Should Maria consolidate her personal loans to the 7% offered by the credit union?
Explanation / Answer
Currently Interest Expenses = 6%*10000 + 11%*6000 + 8%*25000
Currently Interest Expenses = $ 3260
Proposed Interest Expenses = 7%*41000
Proposed Interest Expenses = $ 2870
Decision : Yes, Maria should consolidate her personal loans to the 7% offered by the credit union as it will decrease annual interest expenses by (3260-2870) = $ 390