How Can a Debt Consolidation Loan Save You from The Grasp of an Army of Credit Card Payments and Loans?

Taking control of your debts is not just a dream. Debt consolidation allows you to manage your multiple loan payments. The usual problem that most US citizens face is the endless number of payments throughout the month. The sums of these payoffs are of different sizes, and the loans bear varying interests. That often leads to more than one missed payment deadline and penalties. Not only do multiple payoffs make it extremely difficult to manage your finances, but they also make it hard for you to track the due dates.

What makes debt consolidation a comprehensive option?

save money with debt consolidation loanDebt consolidation might not be the ideal option for everyone out there, but if you identify with the situation we described above, it is the right option for you. Moving all or a majority of your monthly payments for unsecured loans onto a single line of credit reduces the number of payoffs to one. That is the main USP of a debt consolidation loan. To find out more, check out nationaldebtrelief.com. So, unless you are sure that you can restrict the number of your unsecured loans to their present count and can make the single payment per month, there is little use of consolidating your debts.

  • Debt consolidation is not a shortcut or a long-term solution. It can take a while to find a company that meets all your requirements. The service provider should be ready to consolidate your unsecured loans, bill payments and lines of credit from store payments. So, here’s what you need to do –
  • Do your research and find a company that offers reasonable rates. The total sum that you are paying right now should be higher than the rates the company is offering you.
  • Check your FICO score and the qualifying credit score criteria for the company/companies of your choice.
  • Check how many payments you can collate. Sometimes, combining all credit card payments, unsecured loan payments and medical bill payments is more profitable than only consolidating lines of credit.
  • Find out about the company’s consultation and origination fee. You should count them as a part of the cost, and when you compare the current payments to your possible future payments, do not forget to include the cost of origination.

Yes. It does take quite a bit of work. So, you might wonder why you should consolidate your standing lines of credit after all. Honestly, debt consolidation and subsequent personal loans are lucrative to almost everyone who is tired of juggling multiple loans in many ways. Naturally, it is an efficient way to pay many lines of credit in the form of a personal unsecured loan.

Why should you opt for debt consolidation loans?

Here are more reasons why debt consolidation loans are so attractive –

You pay off multiple credit balances

We all know how sneaky and steep credit card interests can be. Even the 0% interest credit card that you are using right now to pay your dues is only a ticking time bomb. The rates will explode in 6 to 8 months. The cumulative rates of multiple credit lines can be quite high. Revolving debt is worse since it is more difficult to track and manage. People often end up paying way more than they deserve, and that has a substantial impact on your credit score too.

Mortgages, automobile loans, and student loans are the installment debt kind. There are fixed payments, and it is also possible to consolidate them into one payoff to just one creditor. In fact, once you combine the different lines of credit and your outstanding loans, you can achieve one manageable monthly payment.

You enjoy lower interest rates

Having a $15,000 credit card debt on a 17.99% interest rate can kill your finances. Let us figure out how – most people make minimum monthly payments on their credit cards. You will take 253 months to pay your dues to the credit card company, and you will pay a whopping $14,581 in interests. Now, that sounds ridiculous, but sadly, that is true.

Let’s say you have an offer to consolidate your debts in exchange for a personal loan with a 36-month repayment period. It comes with a 12.5% interest rate and a 15.742% APR. If you accept this offer, you will quickly pay your debt off in 3 years, and you will pay roughly about $3065 in total interests.

That is precisely how debt consolidation loans help people pay off their lines of credit, multiple unsecured loans, and several student loans at much lower interest rates. In the above scenario, by applying for the consolidation loan option, you can save over $11,500 in interests. Consolidation loans have the power to lower the interest rate for the debtors, although it sounds like you are merely taking out another credit on top of the ones you already have.

You enjoy manageable monthly payments

The one reason most people apply for consolidation loans is that they are paying too much per month. These loans can help to bring down the monthly payments since they offer you flexible repayment terms during the time of sanctioning. Choose a more extended period to lower the monthly payments, but remember that the longer you take, the more interest you have to pay as well.

Never set your goal at making the minimum payment. Instead, think about paying the maximum amount that your current budget and standard of living permits. Having a realistic spending plan and a monthly budget often helps people to understand how much monthly payment they can make to the consolidation loan company. So, get yourself into debt counseling and debt management to understand the reality of your financial situation. Do not make promises that you cannot keep. Not making payments can attract hefty penalties and even lawsuits from the company.

Debt consolidation loans are full of advantages, and they have the power to make life smooth sailing for you. Nonetheless, they are not the solution to your spending problem or your debt. They are a temporary relief, and you need to pay off the same amount in single installments and a flat rate to the consolidation loan company. Consolidation does not make your debts go away. They just unify the monthly payments.

4 Types of Debt Consolidation Loan Options

The year has just begun and you probably want to progress without any additional debt. Perhaps you wish to get a hold of your finances this year and cut down on spending. If this is so, then you should consider looking for a debt management system.

Besides there being a big number of credit management service providers, it would be prudent if you’d consider debt consolidation. This is a debt refinancing process that involves taking up a big loan to pay off small outstanding loans and debts. This has been shown to be an effective consumer debt management system and is therefore common in personal finance institutions.

Debt consolidation loans make debts manageable since you will be servicing one loan rather than multiple small loans and debts that can slip off your mind when due. Often, there are lower rates charged on the debt consolidation loan compared to the average rate on the multiple debts.

So, do you think that debt consolidation is your way out of a financial crisis? Do you know the most preferable or suitable debt consolidation process? Here are the 4 main types of debt consolidation processes:

  1. Consolidation through a debt consolidation company

Statistics show that there is an ever increasing amount of consumer debt. To help many people in need of debt relief or management solutions resolve or manage this, there has been a subsequent rise in the number of companies offering personal finance solutions.

One of the solutions or services provided by such companies is debt consolidation. You will easily come across firms exclusively offering debt consolidation. What happens is that you will receive advice on debt management alongside the loan. The company often pays off your creditors then you are left with one loan owed to the company. This gets your creditors off your neck for good, as long as you don’t accumulate any more debt.

The reasons why you should consider this option is because the resultant (new) loan charges lower monthly repayment since they’re charged lower interest rates. This option often saves money at the end of the repayment period.  If your biggest challenge has been forgetting to pay loans on time, the debt consolidation loan leaves you with only one loan that you can’t forget thus avoids default penalties and late fees associated with forgetting some payments.

Unfortunately, you will not enjoy the lower interest rates on your consolidated loan if your credit rating is poor.

  1. Balance transfer consolidation

Say you have several accumulated credit card debts; wouldn’t you want to transfer all those debts into one card with zero interest rate chargeable? The balance transfer consolidation option is an effective way to clear your credit card’s negative balances if you are certain that you will change your lifestyle and spending, and if you are certain that you will have repaid the debts fully by the end of the zero-interest rate period.

Most companies offering balance transfers on credit card balances give between 6 and 18 months. During this period, you should be able to repay the balances. This is an affordable option compared to normal repayment of a high interest credit card loan. You will, however, pay a transfer fee that is often between 2-5%.

  1. Home Equity Line of Equity Loan (HELOC) Consolidation

A debt consolidation loan is either secured or unsecured. HELOC consolidation is an example of a secured debt consolidation loan. In this case, your home will be used as collateral for the loan borrowed. This solution is effective because you can get a loan of up to 80% the value of your home.

Unfortunately, they do not have fixed terms since the value of your property is somewhat determined by the market. There is no control over external factors in finance. By securing the loan against your home, you will enjoy lower interest rates on the loan. Even though this rate will vary, it will be lower nonetheless. The other downside of HELOC consolidation is that you risk losing your home if you default payment.

  1. Peer to Peer (P2P) consolidation

This is one of the new debt consolidation processes. This is an option that allows people to lend money to each other through P2P lending companies. The P2P companies connect you with people with money they are willing to invest. The investor gains through the favorable interest rate that is charged on your debt consolidation loan. Besides the returns on investments and interest on the money lent, lenders also get satisfaction from helping people in need.

Compared to the loan you will get from the bank or any other financial or credit institutions, P2P loans charge lower interests.

The market is filled with all these options though caution is crucial when shopping for a debt consolidation loan. Some of the precautions you must exercise include:

  • Steering clear of scams

Avoid highly aggressive sales agents advertising deals that are too good to be true. You should also not sign contracts with companies that ask for any form of deposit for registration. Trust your gut instincts.

  • Work with reputable companies

Reputable companies have been in the market for a long time and they will offer the best advice. The chances of the company disappearing with your money are less and you can hold someone responsible. Look out for reviews, comments, and complaints on the company website and review sites to know if a company is trustworthy.

  • Get credit counseling

The reason why you are in debt is probably poor financial management. Do not get to the end of the year with more debt on your back. Create a budget and stick with it. Live within your means.

In conclusion, attaining financial freedom is a challenging but achievable vision. Talk to your finance planner and determine your best debt consolidation process. Change your lifestyle and learn to live without any debt on your back. You should also undertake sufficient research before signing contracts. Follow the advice above and your financial freedom goal will come true at the end of the year.

Recoup Your Finances by Availing Debt Consolidation Loan

It is not that you always need to be neck deep in loans to make you feel so much uncomfortable that you seek ways to get out from it. Even if the loan amount is not much of concern for you there is yet something very important that you want to protect. It is your credit rating that you can hardly allow to be dented. Modern lifestyle is highly dependent of debts for decent living. Debts have been wound around our lives and whether you like it or not, at some point in time you have to turn to it. Therefore, you know very well how good credit rating can make you a good candidate for getting loans. Hence, the need to protect it from getting tarnished, in case you happen to be defaulting with existing loans.

Issues with multiple creditors

Repaying capabilities are not always the reason why people fail to keep up with loan repayment schedules. Although it might be true for some people, most point to the troubles that they face in servicing several creditors. It is common nowadays that people use several credit cards and maintain several loan accounts concurrently. Each account has its own payment dates and consequently there could be several dates in a month when payments have to be made against the loans. This can become quite tasking for two reasons — firstly, remembering the dates is often difficult and secondly, keeping track of finances and allocating funds for timely payments needs close attention. Failed payments could directly affect credit scores that can further weaken the prospects of securing fresh loans.

Reasons for failure

On analyzing the situation that has been described above it will be easy to understand that the problem crops up from the number of creditors that have to be handled.  Each credit account has to be monitored individually to ensure that billings are correct because there are instances when some errors can creep in and add to your woes. Going through many bills every month at different times and matching with various payment dates are no less challenging. Moreover, funds have to be allocated to the accounts at the right time to effect payments. Taking everything together, it is a cumbersome task that can be quite stressful and even difficult to manage that often might lead to missed payments.

Looking for remedy

Considering the realities on the ground, it has to be accepted that you have to find out ways of living more comfortably with credits and managing debts in a smarter way. Although it would be ideal to seek a debt free life but it could be really hard to make it happen.  Rather, finding methods of coping with debts in a better way is a more practical way of tackling the problem.  There are three financial options that you can try out to resolve the problems faced with multiple creditors. All these are aimed consolidation of loans – dealing with a single loan account that replaces many. Read on to know about your options of consolidation.

Take personal loan

Taking out a personal loan can be thought about but it is far from practicable to make it work. Personal loans entail much higher rate of interest that could leave you paying more than what you have to pay now. The terms of payment may not also be favorable. It can affect your affordability and defeat the purpose of consolidation of loan accounts. Moreover, personal loans are given for smaller amount and the sum that it fetches might not be enough to pay back all other loans.

Line of credit against home equity

If you own a house, you can think about converting its equity value into a line of credit for obtaining some money to pay back other loans. While getting the amount you need is not a problem, the interest is also lower and the terms are also extended, it needs careful consideration to decide using this facility. The loan that you get is only for a portion of the home equity with the major part remaining unutilized. Since your home has the potential of bailing you out from much bigger financial crisis, exercising the options for credit consolidation may not be a wise decision.

Get a fresh loan specifically for consolidating debt

Loans are available for various purposes and are named according to it. There are home loans for home making, vehicle loans for buying cars and there is even a special category of loan for debt management which is known as debt consolidation loan. This is perhaps the most used option because it comes with some benefits that are just suited for the exercise. Unlike personal loans, this does not have any limits attached to it and can cover any amount of outstanding loans. It offers lower interest rates and favorable terms can also be negotiated. With the right attitude of using this option correctly to wipe out other loans, it is the perfect solution for consolidation that you have been looking.

Getting the best loan

In order to get the best loan for consolidating debts, there are some methods to follow.

  • Shop around – The money market is highly competitive and you should get a good bargain for the new loan that you will be taking. Do not be carried away by the face value of offers. Do a thorough analysis to understand what your benefits are and then shop around to get the best bargain.
  • Unsecured loan – Look for loans that are unsecured – that is available without asking for any collateral security.
  • Interest cost – While shopping around make sure that you get the lowest interest with favorable terms. This would help to save money through consolidation.
  • Costs and fees – Know about the costs that are associated with the loan – like closing costs that some companies charge. Also know about the fees to be paid, if any.

Conclusion –

Once you have identified the new lender, it is time to make use of the opportunity for not only consolidating the loans but using it to your advantage for recouping your finances.