There is no point running away from our debts. Our debts follow us everywhere and some way or the other they must be repaid. I had piled up so many loans two years ago that I worried whether I will be left with any money after my debts are repaid. That is when I learnt about consolidation loan. Drawing such a loan against all other impending loans, can make the entire process easy. Once such a problem eases out, there will be no extra charges, late fees and bad credit that can make situations worse.
I was so thrilled when I got my first credit card that I did not at all acre about the credit limit that I happened to exceed inadvertently. Debt consolidation is generally advised when there is need to pay credit card debt. Credit card debts generally have high interest rates. Against any property mortgage like car or house, one can do debt consolidation. Since, the interest rate in this case goes down; people manage to pay off their debts quickly.
There are several debt consolidation companies today, that are present online. They have lenders from various fields who offer great interest rates.
People often do not understand when they should and when they should not do debt consolidation. Consolidation loan should only be taken when one has got a lot of loans to repay and is not having enough monetary backing. I made a mistake of applying for these loans without even properly considering my monetary conditions. When lenders found out that I can actually pay back my debts without major difficulty, they backed out from offering me a consolidation.
When shouldn’t one go for consolidation?
Checking monthly payment capacity is necessary. When I actually went back home and calculated my income and expenses, I realized I was well capable of paying back my loans without going for consolidation. On assessing properly people often happen to find that the amount of money they will be spending on loan consolidation is equal or more than the money they spend on debts. If such is the situation, then there is no point opting for this option.
Chances of going into further debts
For people who spend more than they should, end up in debt related troubles frequently. These loans will then not be of any help because in future people may end up in bigger problems.
Debt consolidation is quite a complicated procedure. I initially did not get how people would take one loan and repay his existing ones. But, over the years I learnt quite a lot about these types of loans as I got into this career. The fact, that one would be able to consolidate all the money he owes in a single payment, makes many people go for consolidation loan which is provided by many financial organizations today.
Benefits of this loan type
These kinds of loans are generally taken when people accidentally run out of their credit card limits. Often, students also take quite a number of high interest installment loans. The best part about this loan is that one would be in a position to roll these small high interest loans, into one loan of small interest rates.
The problem with this type of loan is that finding fair interest rates is quite difficult. If a person sees that the interest he is receiving on the new loan is nothing better than the interest he was charged in the previous loans, then there is surely no point in drawing these loans. A little carefulness must be adopted in these cases.
It is not easy to get a loan consolidated. First thing is obviously finding a person who would be ready to do that. While watching TV I used to feel that there are plenty of companies who are eager to offer consolidation loan facilities. But, when I got the real picture, I understood that things are quite different from what they actually appear. Though a lot of companies promise to help customers cut their loans to half, it is not easy to find who would easily do it.
Getting a credit report
This is the first thing I did. Getting a FICO score or a credit report is really important. Top lenders and companies would only agree to give a debt consolidation on the basis of your credit score. Fortunately, my credit rating was not that bad which made it easier for me to get a loan at a lower rate of interest. Accuracy in the report is essential, which is why I would suggest getting the report done by a trusted friend.
Thinking about a few options
A lot of people simply draw these loans because they wish to save money. If you are not in dire conditions then do some cost-cutting and pay off your loans as soon as possible.
Getting the right consolidator for consolidating your loan is not easy. There are so many people available moth online and offline. They do not always offer an advantageous interest rate. Finding the right consolidator is sure difficult. I had to drop some sweat before I got hold of a lender who was kind enough to understand by debt situation. Generally people opt for consolidation loan, when he knows that he would not be able to pay back his loan in any way.
Doing some research
Before giving up hope, it is necessary to shop around. Try to get some quotes from various lenders. The more options one is able to keep at hand, the better it is. Comparing the rates will give a clear picture of what will be good for him and why. It is better to get the quotes in writing, in case the consolidators back out later.
Understanding the fees associated
One should be very careful and try to understand the various fees that are associated with the loans. One will have to apply correctly and actually, in order to get a really good interest rate. The quotes and final interest rates can vary from the quoted ones.
There are a lot of different types of loans about which most people are unaware. In fact, a few ago I had no idea about what a consolidation loan meant. Actually people end up taking multiple loans, are relieved from the burden of so many loans by replacing them with a single loan. This single loan has a lower monthly payment and the payment period is longer. My brother was going through a really bad phase he found himself in a muddle when he was under the burden of three loans. On the advice of a well-wisher he went ahead and did debt consolidation. He therefore had only to pay a single loan with the added benefit of a fixed rate of interest.
Requirement of an asset
For debt consolidation, one will require having an asset. The asset will serve as collateral and in most cases people use their house as an asset. This collateralization of the loan offers a low interest rate which makes repaying the loan easier. Collateralization signifies the forced sale of the asset. Thus, the lender can see reduced loan risk which makes him lower the interest rate.
On danger of bankruptcy
In case a borrower faces a danger of bankruptcy, the debt consolidator has to buy the loan at a discount. But, every debt consolidation company may not be eager to do so. This is the reason, a debtor should be very careful while looking around for a debt consolidation company. Moreover, since debt consolidation can affect a debtor’s ability to discharge debts in case of bankruptcy, such a decision must be taken extremely wisely. It is better to take the help of a friend who is experienced and would be able to advice a person on the same. Searching for online lenders and other products can also be helpful.
There are several different options that one must consider in order to get ready for drawing a consolidation loan. Simple methods and processes can actually help us fro, getting into these complications. I have a great many experiences in taking loans and facing problems with repayment. But, nothing is very difficult if proper options are calculated.
Having a talk with the credit card company
There is no point, giving up a battle before you actually lose. Getting a debt consolidation is more difficult than it seems. For a person who has always maintained good credit score, it won’t be difficult to get into proper negotiation with the credit card company. They often, offer a lower interest rate when they find that the person is in dire crisis, but has a good credit history. Thus, loan payment will become easier and there would be no need to search around for consolidators.
Selling off or mortgaging a property
It is said that there is always something that is worth selling and will not affect our lifestyle too much. For a lower interest rate consolidation, a mortgage is required. Selling away an old car or bike, will only be beneficial in this situation.