The majority of people will be familiar with ads for debt consolidation, which say they can “help you get out of debt quickly” and those that say they can “cut your payments by 50%”. A single loan with a lower interest rate and better payments is usually the end result of consolidating your high interest loans into one. However, things don’t always go as smooth, which is why you need to be familiar with some tips for a debt consolidating loan. These will not only give you extra info on choosing wisely, but can also save you from making the wrong decision! Read the following tips for a debt consolidating loan and get one step closer to making the right decision.
Order Your FICA Score and Credit Reports
The loans you get are based on your credit score, so it is important you know what it is. This is the first of tips for a debt consolidating loan, as if you find you have a reasonable credit rating and fairly good score, then you can consolidate your loans at an improved rate.
Check Out Other Options
Another one of the tips for a debt consolidating loan is to check out other options.
- If you are after saving money, you may just want to consider paying off your debts as quickly as you can by arranging them.
- You can go through your loans to check which has the highest interest rate.
- Pay that off first and still make small monthly payments on other debts.
- Contact credit card companies and discuss lower interest rates.
- Consider consumer credit counseling. This has helped many with low-cost or even free counseling on how to prepare a budget and manage debt.
The Differences between Consolidation Loans, Debt management Plans and Debt Negotiation
You will find there are several companies online who claim they can decrease your payments as well as get you out of debt a lot quicker using consolidation loans. For this, they could be using several strategies, such as bankruptcy, debt management and debt settlement. Another one of the important tips for a debt consolidating loan is understanding the difference between the three.
Debt Consolidation Loan
- This is where you borrow money and pay off other loans.
Debt management Program
- This is when a debt management company or a credit counseling agency serves as the trader between your leaders and you.
- It tries to negotiate decreases on your loan fees or interest rates.
- A debt management program allows you to reduce your payments.
- You then pay the debt management company or credit counseling agency each month.
- The money is then distributed from here to your creditors.
Pay Off Your Debt Quickly
A debt consolidation loan can get you a lower monthly payment because you are spreading the payment over a lengthened time span. Paying off your debts as soon as you can is the best of tips for a debt consolidating loan.
Getting the Right Loan
A secured loan is one that is supported by a security benefit. Getting a loan that is secured is possible. A secured loan is usually secured lines of credit, second mortgages or home equity loans. These have a lower interest rate than unsecured loans, as they are less risky for lenders.
Never sign up for the first debt consolidation loan you are offered. Some tips for a debt consolidating loan cannot be avoided and this is definitely one! You need to get several quotes from numerous different companies and compare the terms and interest rates. Getting all quotes in writing is recommended, as this allows you to easily compare them.
Carefully Read Your Contract
Before signing anything, you need to read every word thoroughly until you understand it all. If you have any questions, make sure you ask them until you properly understand the answers, even if that means asking several times. Hiring a lawyer can also help with things that you need answers to.
Don’t Pay For Credit Insurance
Many lenders will try and pressure you into buying credit insurance. They may even force you so much that they say things like your application will be rejected or they could even hide the cost from you. If you experience yourself in this situation, you need to get out fast and file a complaint with fitting authorities in your state. Credit insurance can add a large cost to your loan, and usually offers very little security.
Finalize the Loan Process
Now it’s time for the completion of the application process, which should be straightforward, but can take some work and time. If at the end of the procedure, you find the loan rate is not as expected or based on what you were quoted, then you must ask why. After this, you can check with your next best options and during the whole process, make sure you are not taken in with the “bait-and-switch.”