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

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.