Consolidate debt loans? Before going on this, try debt management first. Consider what the situation is. Is the problem due to some credit cards with balances that charge high interest? Or is it an auto loan that charges a high interest?
Those who are not able to control their debts need someone to counsel them as a debt management will help consolidate the consumer’s debt. This involves negotiating with the creditors and making arrangement to pay at a lower interest rate. This will help the debtor able to build up his credit back up.
All the debts that are out of control can make one consider a consolidate debt loan. This is perhaps an attractive option because one may be able to get rid of many monthly payments. Just pay one lower payment at a lower interest rate. When someone has some debts he owes and can’t make the debt under control, then a debt management program may help.
Some of the principles behind consolidating your debt are explained in this video. Watch it to get another perspective:
Generally, one will be able to save a lot of money in interest charges alone, not to mention other types of fees that credit card companies generally charge (such as over the limit fees). Basically, there are three ways to consolidate the monthly loan payments into one payment.
The first option is to borrow money to pay off the debt. One needs to be careful with this because depending on the amount one needs, with an unsecured credit, the lender will likely bump up the interest rate. Be sure to calculate the interest rates and fees on the existing loans and compare them with the new plan to be sure it is a better deal.
Be certain there is money saved before moving forward with the loan and signing on the dotted line. If the consolidate debt loan does not save one money and one is a home owner then a home equity loan or a line of credit may be considered. In some cases, the interest on a home equity loan may be tax deductible.
Depending on which lender is chosen, one may be able to borrow a percentage of the existing equity. However, please be advised that should there be a default on this loan, the home is at risk. With increasing the debt owed on the primary residence, so is there a corresponding increase in the possibility the home could be lost.
Once all the options are exhausted including the home equity option, one may want to consider the zero percent credit card balance transfer option. The credit card companies that offer zero percent financing for balance transfers generally impose a short time limit (maybe six months or so) and then the higher interest rate will kick in.
This should be treated as a short term solution only until one that is good for a longer term is locked in. Whatever the choice to consolidate debt loan, remember that the goal is to make the payments more manageable, reduce the debt and eliminate it and not just defer the amount owed.
Consolidate Debt Loans, Secured or Unsecured?
Consolidate debt loans come into two types: secured and unsecured. Secured is when the borrower has a collateral like a home or a car that the lender can take possession of when the borrower defaults or can't comply with the terms of agreement.
A bad company may misrepresent the terms and the borrowers may lose their home. The unsecured loan does not have a collateral the lender can repossess but it may carry a higher interest rate and may have hidden cost as well.
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