Debt Consolidation Loan Archives - California Debt Consolidation Quote

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.

Comparison Shop

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.”

The Risks of Debt Consolidation Loans

Knowing the risks of debt consolidation loans will help you avoid creating more debt while you’re working to pay off the original.

Hazard 1: Feeling free of debt.

Paying off the credit cards that have been hanging over you is a great feeling but that zero balance can give the false sense of being bill free. You still have to pay just as a single loan instead of many smaller bills.

Hazard 2: Repeating Old Habits

If your reason for getting a consolidation loan is overuse of credit this warning is for you. Now that the cards have so much equity available, you may be enticed to begin using them again. If you can’t control your spending you may end up running up the same card you are still paying off with your loan. The best way to avoid this is to close off your accounts save for one. The single open account can be used sparingly and paid off in a timely manner to fix your credit score or if your score is still intact this card should be kept somewhere you cannot use it for impulse purchases.

Hazard 3: Check that interest rate

If your credit is good or you are able to provide collateral you can benefit from the lower interest discussed earlier. If, on the other hand you have no collateral to put up and your credit score is already low you run the risks of debt consolidation loans interest being higher than that of the original debt and ending up owing more than you did originally. Be certain to investigate more than one lender and various solutions before committing to something that will not significantly lower your current payments.

Hazard 4. Collateral can be the highest price to pay

The greatest equity most people have at their disposal is that of their home. Risking your home for a loan means if you are unable to pay back the loan for any reason you will lose your house. This is true no matter what you use to secure your loan however it is one thing to lose an automobile, piece of jewelry or other valuable, it is a devastating loss to say goodbye to the sanctuary of a roof over the head of your family.

Take some time to seriously consider whether you can avoid these risks before taking the plunge. There are other ways and it is best to investigate each fully and making an educated decision.

Debt Consolidation Loans CAN Work For You

Now that you have considered the risks associated with this type of loan we can discuss the ways you can make it work for you. One useful point is that consolidation loans can be used in a much more flexible way than debt management or settlement which are far more limiting as to the types of debt you can pay with them. Secure loans cannot be included in other debt payment types but loan consolidation can take them under their umbrella as well as loans that not even bankruptcy can forgive such as Federal Student Aid.

Having looked at both the possibilities and risks of debt consolidation loans if you believe this is the right choice for you here are some tips for making the most of the program:

If the interest is not lower than your current interest keep looking. There are many options such as payday loans, peer loans, secure and personal loans. Do not jump into the first one you check, make sure you’re getting the best possible rate.

Be sure you’re eligible for the right loan. Good credit and a steady paying job are essential.

Be prepared. Unlike other programs there is no one there to guide you along the way. Go in with a payment plan and stick to it.

The most important to do is to learn from the situation and avoid repeating mistakes. If you are aware of and avoid the risks of debt consolidation loans you can get yourself out of debt.