Written on June 6th, 2010 by adminno shouts
Swimming In Bills? A Debt Consolidation Loan May Be The Answer
Every day, individuals are faced with mounting debt that is gradually getting out of control. Once credit cards reach their limits, payments are late or interest skyrockets, it literally becomes a battle of sink or swim in the debt pool. Consumers often turn toward a debt consolidation loan if their current debt can be combined into a smaller monthly payment.
The most popular reason for a debt consolidation loan is to get rid of high interest credit cards. It is a well known fact that credit cards carry a much higher interest rate than secured loans, including home and auto. By paying only the minimum payment, it will typically take 15 to 30 years to pay off most credit card debts. The reason is because the majority of each month’s minimum payment is swallowed up by interest with very little, if any, money going toward the actual balance. By requesting a debt consolidation loan, many consumers qualify for a much lower interest rate and smaller monthly payments. As the years progress, this reduction can result in a substantial savings while helping the customer to save money every month.
The process by which an individual applies for a debt consolidation loan is very similar to any other type of loan. A typical application will ask for the applicant’s name, address, telephone, social security number and employment information. In most cases, the potential lender will request a copy of tax returns for the previous two years, current pay stubs and/or employment verification. In certain instances where the applicant has poor credit, the lender may require a co-signer or collateral before approving the loan.
With the continued growth of the internet, there is no shortage on potential lenders. A debt consolidation loan may be requested at a local bank or credit union, but may also be sought online. With such a broad range of options, consumers are better equipped to shop around for the most competitive interest rates and loan options. In many cases, an account holder will have success with his/her own bank as they have an established history with the organization. In other instances, a competing bank may be more willing to approve a debt consolidation loan in hopes of earning the applicant’s future business. For those who opt to seek a debt consolidation loan online, consumers are urged to proceed cautiously before providing their social security number on any application unless they are certain the lender is legitimate. One way to do that is to check out the company’s history with the local Better Business Bureau.
A debt consolidation loan is, in many cases, a way for individuals to regain control over their financial life and save some extra cash in the process.
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Written on November 5th, 2009 by adminno shouts
A Loan For Debt Consolidation Allows You To Pay Several Creditors With One Simple Payment
Paring Down Payments
A Debt consolidation loan is the creation of one new loan for the purpose of paying off all other current loans and credit card debts.
A loan for debt consolidation allows you to pay several creditors with one simple payment. A debt consolidation is considered a personal loan.
The primary purpose behind debt consolidation borrowing is to lower your interest rate while providing the debtor with a monthly payment she or he can afford. It also prevents an adverse affect to the debtor’s credit rating as well as keeping assets from risk.
A debt consolidation loan may be well advised for someone who is having a difficult time making monthly payments on current loans that carry a high rate of interest. The additional benefit of debt consolidation is that the consolidation eliminates the debtor’s contact with the various creditors. This stops collection calls and correspondence.
What you’ll need to qualify for a loan for debt consolidation:
* A written budget, showing each month’s expenses and income.
* Proof that you have a steady source of income adequate for the repayment of the debt consolidation loan. Pay stubs and/or tax forms would suffice.
* You may need proof of collateral, such as home equity documents or car title.
* You might also need a co-signor if your credit is not adequate.
You can pay off a wide variety of debts and loans with a debt consolidation arrangement. Eligible bills include medical, credit card, retailers, personal loans, student loans and even checks returned for insufficient funds.
Before considering a debt consolidation there are several factors you should weigh. They are:
* Fees involved in consolidation. While a small fee is common, reputable debt consolidation firms will not claim to reduce the amount of debt you owe nor will they charge you a substantial upfront commission to do so.
* The consolidation interest rate. What you want is a fixed rate loan and a rate that is lower than the average rate of your current debt.
* Consolidation loan payments. You’ll want a monthly payment that is lower than the combined payments of the current debt, although this should not be accomplished by any considerable lengthening of the repayment time.
* Whether your credit rating will be negatively affected. If the consolidation firm is not clear on this, go elsewhere.
As part of your debt consolidation loan consideration you’ll want to look realistically at your total debt, determining exactly the amount you’ll need to borrow for consolidation. You should also contact all lenders and see if any will offer a settlement (keeping in mind that payoff off a settlement figure rather than total debt may negative affect your credit rating.)
Your next step would be to put down on paper your monthly budget, including all your expenses as well as your income. Do not neglect to give yourself some leeway – a small emergency or miscellaneous cost figure. Take a good hard look at what you can afford to repay if you borrow for consolidation.
Debt consolidation advantages:
* You can save money by decreasing the interest rate you are paying, which in turn decreases your monthly debt consolidation loan payment.
* You will only have one loan to worry about paying each month.
* You’ll only have one creditor to focus on, which means the others will not be contacting you.
Debt consolidation disadvantages:
* You’re probably going to be extending the time period in which you are paying your debtors, thus increasing the total cost over time.
* You may have to offer your home or your vehicle or other significant properties as collateral. This puts them at risk should you default.
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