Debt Consolidation Loans
Are Debt Consolidation Loans Dangerous?
Escape From Financial Disaster
Doing a debt consolidation can extend the due date of existing loans and in the short term relieve the pressure to pay.
If you have many debts which are becoming unwieldy or unmanageable, you can consolidate them into one new loan with a new lower repayment amount compared to the total of all the payments from the previous different loans.
A debt consolidation loan merges several debts with varying interest rates into the one new loan that can have a significantly lower interest rate.
Unfortunately, when we are delinquent in the payment of any of our debts, their various monthly payments are still due and payable and along with the lack of cash flow at critical times of the month it can cause financial havoc as we try to juggle the budget.
Also, we end up paying our debts month after month, only to realise that the majority of our payments were only going towards paying the continually compounding interest.
Debt Consolidation Loans a Panadol
For A Financial Headache
Fortunately consolidating debt makes financial planning much less of a headache.
You can stop thinking of all the different debts, because you can just basically face a single consolidated monthly payment.
Debt consolidation is a common approach in managing the difficulties of having to pay numerous monthly repayments at any one time.
Filing for a judicial declaration of bankruptcy is an option to relieve your loan burden, but there is a lot to lose with this option and such should be treated as a last resort.
A loan consolidation can help the applicant out of financial trouble temporarily.
It may for some, be the last option before declaring bankruptcy.
Nonetheless, a consumer can greatly reduce their debt stress by combining multiple payments into one payment, and preserve their credit background by avoiding bankruptcy.
Debt Consolidation Loans – Are They The
Best Debt Management Solution?
You may hear a lot about debt consolidation loans, but you need to understand exactly how it works if you want to apply the solution to get the right debt fix.
There are many lending companies who offer debt consolidation loans for beleaguered debtors. Consolidation loans are in high demand.
In any case, they make financial debt payment issues easier for the debtor.
Aside from having just one loan to worry about, loan consolidation also usually provides a single loan often with a lower interest rate (compared to the total amount of the interest rates for the individual debts concerned), as well as a new maturity period that can effectively extend the due date of the individual loans.
Consolidation Loans – Security
May Be Required
Frequently, credit institutions that provide debt consolidation loans at the best rates ask for a mortgage from the person in debt, a form of security to ensure compliance with the terms of the new, unified loan.
Debt consolidation saves an individual from handling large debts from multiple creditors.
It combines all your debts into a single debt management program.
Consolidating debt lowers the interest rate and waives off the late fees on your loans.
It also removes the accrued interest and penalties on your loan.
Each month, you now only pay the one loan repayment amount instead of many creditors with different due dates.
Consolidating debt offers financial relief while avoiding the financial extremes of the likes of bankruptcy, lost assets and poor credit ratings.
With so many loans to choose from, if you consolidate debt, how do you know which one is the right one for you and your situation?
With Any Debt Fix – Avoid
The Financial Minefield
There is any number of financial institutions that offer debt consolidation loans.
Keep in mind, the better the security (if you have any) you offer to secure the loan with the lender, the better the interest rate you will be offered.
Typically security can be a vehicle in good condition or ideally, real property. Offering real estate property will attract the lowest interest rates. There are loans available without security, however there will be limits on how much you can borrow and they will be in the higher interest rate category.
That said, this playing field can have a few nasty exploding type mines waiting for the unwary.
Therefore, it’s advisable to do thorough research prior to signing up to any program.
Don’t be pressured into signing anything until you’re satisfied and comfortable the program being offered is in your best interests.
Also, there is any number of free debt counseling programs available to people who need debt advice, just Google ‘Free Debt Advice’.
What Happens To My Credit Rating?
Consolidating debt does not necessarily lower your credit score directly.
Your credit score is lowered only when you make a “less than full” payment, or miss a payment altogether.
When you consolidate debt, you pay back the full debt to the creditor. Unlike bankruptcy and debt settlement, there is no question of any debt reduction.
So consolidating debt won’t specifically deliver a direct blow to your credit rating.
As long as you make all the loan repayments on time and don’t create new debt that can cause problems for you, your credit rating will not be affected.
In fact, it will improve your credit score by paying off the problematic debt with a new loan.
Are You Bonkers?
Another trap to watch out for is ‘racking up’ new debt once your loan consolidation is in place.
Once the multiple debt payments have been consolidated into the one payment there is the temptation to go out and start spending again.
Other traps to stay away from are fast cash loans lenders, because they will have you spiraling out of control.
To do this would be seriously short sighted as the debt hole will only get deeper and bankruptcy may be inevitable and not too far away. Don’t do it!!!
Use loan consolidation as a simple solution that combines multiple bills while providing two key benefits, which are a more effective debt management alternative and it will also enable you to enjoy a lower interest rate for the amount you have owed.
Loosening The Load On The Road To Financial Freedom
A debt consolidation loan is merely the first step on the way to sovereignty from bad debt.
It is certainly not an immediate answer. Once you have combined your debts with a loan, you still have a commitment to your lender.
A loan consolidation will not instantly erase all your debts at one time. It is just a method of debt repayment to loosen up your load and give you a simpler method of handling your financial life.
If you are looking for debt solutions seek out the help of a knowledgeable professional mortgage broker who can advise you on the good and the bad of debt consolidation loans.