• Lower your monthly payments
  • Reduce stress and live your life
  • Avoid personal bankruptcy court

Analyzing and Finding the Best Debt Consolidation Loan

Are you facing debt problems and failing to manage them? It definitely makes you crazy when you spend your nights worrying about your debt payments, starting with a dozen credit cards you have been enjoying using. You should not end up on any settlement instantly. You must obtain accurate and sufficient knowledge to choose what’s best for you. It’s unwise to make a decision without doing proper homework.

Finding the Best Debt Consolidation Loan

Considering Your Options

If you are out of money and have to do something about your dues right away, look out for all possibilities.  Bankruptcy is one option but you would be scared of loosing you assets as stated in Chapter 7 bankruptcy. No one wants to be in such a position unless there is no hope.  You would have also tried talking to some credit counseling agency but all they could do is to lower your monthly payment a bit and lessen their harassing calls. This would be no good if your situation is serious. Here you are, ended up thinking about the best debt consolidation loan as you can find no other way out of your nightmares!

Analyzing a Debt Consolidation Loan

What is a best debt consolidation loan?

A best debt consolidation loan lets you merge all your credit card debts into a single debt. The benefit by doing this is that becomes a lower monthly payment, more affordable, and you avoid the hassle of dealing with plenty of loans separately. It basically makes your life simpler and easier.

Difference between credit card debt and a debt consolidation loan

The main difference between them is same as the difference between a secured and an unsecured debt.

Secured loans

These are debts that are secured by collateral such as a house or anything you own. The risk attached to such a debt is that you will eventually lose your asset if you fail to make your payments. It gives the lender the authority to sell the collateral.

Unsecured loans

These are loans that are not secured by any asset. If you fail to pay for them, the lender can do nothing but to hand you over to collection agency and ask you for payments. Credit cards are a type of unsecured loan.

However, it is not at all easy to meet the requirements for a loan to consolidate your debts. It requires a high credit score such as 700 FICO normally. Sometimes 740-760 is needed to obtain a low rate to make the consolidation useful.

Pros and Cons of a Best Debt Consolidation Loan

  • As we mentioned earlier, the debt consolidation loan is an unsecured loan. If ever you fail to make your payments you merely have nothing to lose. You are not obliged to use your property, car, or any valuable asset against the loan. As debt consolidation loans are unsecured debts, a few companies that offer such loans include Lending Tree, the online lender and Instant Debt Consolidation Loans.
  • Another benefit of such a loan is that it requires you to give fixed monthly payments. Well, this applies to a secured loan as well.
  • When applying for a debt consolidation loan, you must make sure that you agree on a fixed interest rate. There are options of fixed as well as promotional interest rates. Certain banks and credit unions will try to convince you by tempting you with a special promotional rate. You should remember that such rates normally last only for around six months and then jumps into the stratosphere.
  • A problem with unsecured loans like debt consolidation loans is that they are normally offered with a higher interest rate as compared to secured loans. In a secured loan, the lender feels protected because he knows that can has the authority to sell the collateral you offered him. In unsecured loans, however, is taking a bigger risk by giving you the money without exchanging anything. Thus, you will be charged a higher rate.
  • Even the best debt consolidation loan has a downside! This is a just a means to merge your loans, therefore, the amount you owe is same as before. On the contrary, some companies manage to negotiate with credit card companies to reduce your total debt amount and sometimes lower monthly payments. Such companies are known as debt settlement or debt relief companies.

It’s better if you go for actual reduction in debt. National Debt Relief is a company ranked among top three debt settlement companies. Isn’t it great if you get a debt analyses and seek advice from them free of cost. They charge you nothing for advice. Only when they are able to negotiate a suitable settlement with your lenders they charge their fee. When you are already short of money, this seems like the most appropriate alternative.

How to Pay Off a Debt Consolidation Loan

Debt consolidation loans can be a useful tool to pay off credit card debt but only if you use it correctly.

What Is Debt Consolidation, Anyway?

How to Pay Off a Debt Consolidation Loan

Debt consolidation is trading a single debt for a number of them, such as using a new credit card to pay the balance on two or more others. The pros of this solution are:

  • Obtaining a lower interest rate on the new card than on the cards you are paying off
  • Having a minimum monthly balance below that of your old cards combined
  • Feeling empowered and hopeful about your ability to get out from under your debt by reducing your number of monthly bills

There is sometimes confusion of debt settlement or debt management for debt consolidation. The first two do not change your current creditors. They involve other people negotiating new terms for your old contracts. The problem with these options is a possible negative effect on your credit score because the payments you continue to make are not given immediately to your lenders. With a debt consolidation loan your creditors are immediately paid and your credit score is not negatively impacted.

Debt Consolidation May Not Be Perfect

You will have a new line of credit and lower payments. It is all too easy to find yourself using the additional money meant to pay off your debt consolidation loan for purposes other than paying more than your minimum balances or using your new card to increase your debt. It will be important to recognize how you got into the predicament you are in and take strict steps to avoid the temptation of repeating them.

Pay Off Your Debt Consolidation Loan

Take some time to examine the way you created the debt. It could be that you are just not great at controlling your impulse to purchase things you enjoy, or perhaps you feel pressure to keep up with those around you. Not all debt is a result of overspending. It could be that you had a medical issue or home emergency that required you to make financial decisions you might not have otherwise made. Whatever the case in order to pay off a debt consolidation loan you will do well to continue to make the payments you did before over and above the new minimum due, if not more. This will ensure you are paying off as much as possible of the principle of the new loan.

You could use a peer to peer or home equity loan to consolidate your debt instead of a credit card. These loans are closed-ended so you will know the date that the loan will be paid in full even if you can only make the minimum payments each month. Emotionally this can be a great motivator. Being able to see the end of your financial struggles will allow you to plan for great things to do when your goal is accomplished and stay on track. There is another benefit to these options. There will be no additional credit card to tempt you into purchases you cannot afford. With a credit card consolidation you must be sure you can pay off the entire debt before your lower interest rate period ends. If you are not positive this can be accomplished you could end up with higher monthly minimums than before. This can lead to opening new cards for more balance trading and may end up ruining your credit as much as loan management or debt settlement. Now is the time to be honest with yourself and make the difficult choices.

Do not ignore the emotional factors when making a decision about your financial future. Be brutally honest about your ability to exercise self-control as well as what you will be giving up. If you have an indulgence that is of deep importance to you, being able to have a manicure once a month, a standing dinner date with a group of friends that you would feel lonely and left out without, make room in your plan for this so you don’t end up being frustrated and over spending to make yourself feel better.

The best part about learning to pay off a debt consolidation loan is creating good habits you can use for the future. Whatever the cause of your debt you are now equipped with the knowledge of how to avoid these pitfalls in the future. You have culled excessive spending from your lifestyle, learned to enjoy a social life without pricey nights out, and hopefully determined what luxuries are most important to you. When the loan is paid off you will now see how much additional income you have. Consider meeting with a financial planner to discuss the right balance of saving for emergencies, retirement and special treats. A clean slate is a wonderful opportunity for personal growth.

The Guide to Getting a Debt Consolidation Loan

Getting a Debt Consolidation Loan

With debt overwhelming you and creditors calling you to claim their debt, you would do anything to get out of debt, wouldn’t you? There are several people, giving you several bits of advice on how to get out of debt, but a decision about which bit of advice to take and which to leave behind can be quite hard. But, if more than half of the people giving advice suggest one particular solution, would you think it viable? I would. More than half of debt management advisors out there suggest getting a debt consolidation loan to manage your debt. But, before you get a debt consolidation loan, get all the facts on debt consolidation loans and what to look for when getting them.

Why Get A Debt Consolidation Loan?

There must be quite a few reasons advisors suggest getting a debt consolidation loan to address spiraling debt. Here are a few:

All your debt in one Place:

When you get a debt consolidation loan, it poses a great solution to reducing debt. A debt consolidation loan pays off your creditors in full so instead of having multiple loans from multiple creditors, you have one loan to pay off.

Low Interest:

The interest rate savings with debt consolidation loans, especially if your outstanding credit is with high interest credit cards. While debt consolidation loans are not low interest, they carry relatively lower interests than credit cards which carry an interest rate of up to 25%. In addition, it consolidates your debt and you only have to pay one interest rate rather than paying several high interest rates.

Comes with Support:

When institutions offer debt consolidation loans, they are very motivated to keep you debt free in the future. In order to do that, these institutions also offer you financial advice for future spending. They offer budgeting tools and financial advice to keep you out of debt.

Credit Scores:

No institution can erase your negative credit history with outstanding debt, but with a debt consolidation loan and proper financial advice, you get a chance to pay off your debt and improve your credit score in the future. Slowly, but surely, your credit history will improve.

What to Consider When Getting a Debt Consolidation Loan?

There are several things you should know before you apply for a debt consolidation loan:

Get in Early:

Being in debt can be overwhelming. But, the best advice that financial advisor give is to get in early. Consider getting a debt consolidation loan as soon as you see signs of personal financial distress. It is akin to nipping it in the bud as opposed to letting the problem grow out of control.

Consider Reputation:

When considering getting a debt consolidation loan, consider the reputation of the institution you are considering. Ask about the reputation of the institution and look them up with the Better Business Bureau. Get credit only with reputed institutions- ones with no complaints and solid foundations.

Get only as much as you can pay:

Consider your income when getting a debt consolidation loan. Get only as much in loan as you can pay back every month.

Consider what you are borrowing against:

When giving you a debt consolidation loan, creditors usually consider your existing income, your existing collateral and the amount of debt you have. Many times, you do have to show collateral to get a loan. Consider carefully what you put up as collateral as an inability to pay off your debt consolidation loan could result in you losing your collateral- be it house or land or precious metals.

Look at the Big Picture:

Before getting a debt consolidation loan, know that this is a big step. Debt consolidation has to be a long term solution rather than a short term band-aid. You have to be committed to getting out of debt and being debt free in the long term.

Shop around:

As with every other thing you buy, be sure to shop around for debt consolidation loans. Consider the term, fees and the interest rate as you look for these loans.  In addition, when you find an institution with decent terms, you can tell them that you are also considering their competitors to get a better rate out of them.

Read the Fine Print:

Read all debt consolidation loan terms carefully. Read all the fine print and know what you are getting into. Be sure to clarify every term and ask questions before you sign up for a debt consolidation loan.

While there are several debt consolidation solutions out there, debt consolidation loans are a viable long term solution with a focus on getting permanently out of debt. But consider, very carefully, what you are getting into and that you are the focus when getting debt consolidation advice.