Debt Consolidation - What is It?


Debt consolidation. We've heard a lot about it but what exactly is it? Simply put, it is a loan that will allow you to pay off ALL of your other smaller loans. Because you are going through a bank for the loan AND because you are combining all the debt into one payment, you will usually pay less interest. Which means you will be able to pay the debt off faster and save money.

There are a few benefits to obtaining a debt consolidation loan.
  • You will get a lower interest rate.
  • One payment instead of multiple ones may be easier to maintain.
  • Your creditors will be paid off immediately by the bank.
  • If your credit rating hasn't been too damaged, you will be able to save it.
  • You will get out of debt faster.
  • You will pay less interest.

 The advantage of a debt consolidation loan is that it can make your life a lot easier. And as long as you adhere to the procedures stated, your credit rating should not be negatively affected.
If you have a valuable asset like a house, you can use that as collateral. But remember that you are putting the house on the line. 

So far, a debt consolidation loan sounds pretty good, doesn't it? There are some things to be careful of though.

  • If you are having difficulty making the payment now, remember that financial institutions will expect prompt payment. So be sure the new payment isn't stretching your financially.
  • If you have used a co-signer for the loan, they will be on the hook if you don't pay.
  • If you have used collateral, like a house, that is on the line if you miss payments.
  • You will still have access to your credit cards so the temptation to run the debt up again will still be there.

 There are fewer unsecured debt consolidations considered by banks during these times so that is something to consider. 


Still interested in getting a debt consolidation loan? In order to qualify for one, there are a few things the lending institution is going to look at.
  • Your credit rating. It doesn't have to be perfect but the worse it is, the less chance your loan will be approved.
  • A regular income. The lenders want to know you have money coming in.
  • A reasonable level of monthly expenses. Lenders will want to know you aren't wasting the money you have coming in and can afford to make the payments.
If you are considering a debt consolidation, move quickly before your credit rating is damaged too badly by your present situation. A blemished credit rating will hamper your success in getting a debt consolidation loan.

 Another option to consider is debt settlement, which I will discuss next week.

If you feel that you are ready to gain control of your debt, then stop trying to figure it all out on your own and make sure you don’t go another year without gaining control —click here
 
I might be able to help you by supporting you through the 5-Step Financial Stability program that I have used to get control of my financial situation. click here

To your success, 

Karen Magill 

P.S. It is NOT right for everyone – but if you feel having me working with you almost “daily” & giving you a proven step by step system to follow will help you get your  finances and life back on track then for more details. - click here 

 

Comments

Post a Comment

Popular posts from this blog

Do You Remember Your First?

Image
Do you remember when you got your first credit card? The excitement you felt? The urge to go out and buy something on it right away? Did you take your friends or family out for dinner to celebrate or was your first card a store card, like mine was. When you got your first statement in, did you casually look over the amount owing and just fixate on the minimum payment required? Hey that isn’t too bad, is it? I can afford that! So did you do like I did and keep spending? Then one day you realized that casually looking at the amount owing wasn’t going to work anymore – you can’t ignore it any longer. But what happened? You have been making the minimum payments, haven’t missed one, and you aren’t using the card that much so why doesn’t the amount owing get smaller? That’s an easy question to answer. Very little of the minimum payment goes towards the principal debt; it is eaten up by interest. Interest is how the lending institutions make money and they are going to make sur...
Read more

Up and Down

Image
Interest rates go up and down, depending on what is happening in the economy.   When times are tough, interest rates go down to entice people who are apprehensive about borrowing money to get in debt. When times are good, the rates go up since people are more open to taking on additional liabilities to get the things they want. Rising interest rates can be good and bad. Especially if you have consumer debt. Credit cards take a beating – or a I should, you, the credit card holder – takes a beating. A card with a $10,000.00 balance and an interest rate of 16.83% could see an increase of $25 a month just on a quarter-point rise in interest rates. That’s $300 in a year all thanks to interest. Auto and student loans and mortgages on a fixed rate will not have a noticeable increase. Or at least they shouldn’t.   When the loans were taken out,   the rate of interest was fixed at that time. However, if you take out a loan when the interest rates are high, you are...
Read more