debt consolidation loans

Nine Tips for a Debt Consolidating Loan

March 22, 2014 by editor

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.”

Consolidate Your Debt: Different Ideas

September 23, 2013 by editor

It is important that you know how to consolidate debt if you are going to find the right solution for you. There are some great reasons why it is important that you should look into the possibilities of debt consolidation.

You will only have one bill to pay each month
The payment will stay the same
Interest rates should be lower
The overall cost of the debt should be reduced

There are a number of different ways to consolidate any debts and it is vital that you choose the right option for you. It is not going to be easy and it might take a bit of hard work but if the end result means that you are better off each month then it will have had a positive impact.

Reason Why to Consolidate Your Debt

It is important that if you are considering consolidation that you understand the reasons for consolidations and the final product that you are offered suits your needs and reflects in a positive manner on your credit file. You should not be paying more each month for your consolidation loan and you do not want the term to be longer than five years to be completely debt free.

There are many different options that are open to you if you are looking at how to consolidate then you might consider what options that you have available to you.

Approaching a Credit Card Company

You might be able to get a balance transfer to your current credit card, ask them for the best interest rate if you were to transfer and ask if they will not charge a fee. If they don’t offer you any savings tell them you will go elsewhere they might help you.

Do not apply to loads of different credit card companies because this will be recorded on your credit file and will have a negative impact. Always make any repayments on time because you might end up increasing the debt rather than reducing the debt.

How to Consolidate Debt with A Home Equity Loan

This consolidation loan means that you are borrowing money on any equity that you have in your home. This is the value of your home less any mortgage that you have outstanding, if you have equity then it is possible to turn this into a loan, but if you fail to keep up the repayments you can lose your home.

Refinance

It is possible to refinance your home and take out extra money with which you can pay off your bills and this will save you money each month. But you will be paying for the bills over the entire length of your mortgage.

Debt consolidation loans

It is possible to consolidate by using a consolidation loan, these can be more expensive and if you have a lot of debt they might not be the best option for you. The repayment might be higher and the interest rate might be higher too. Or the term that they are looking to hold you for could increase to 10 years and this is a long time. It is important that you know the true cost of the loan including the interest payment.

Credit counselling

It is possible to learn how to consolidate debt by going to a counselling service and they will help you to budget and work out a payment plan that will pay off your creditors. Some counselling services pays your debts and you just pay them once per month, check if you company is going to do this that they are reliable, if a late payment happens you will get the mark on your credit file and not the counselling company.

Settlement companies

It is possible to get a company that will act on your behalf to reduce the total amount of money that you owe. You pay the company the money that you would have normally paid your creditor and they work out a settlement figure and this is sometimes a lot less than the original debt, but this will have a negative impact on your credit rating.

Borrow against retirement

If you have saved up for your retirement it is possible to borrow money against the money that you have saved. It will mean that you have not touched your retirement money but have still had a relatively low interest loan.

Rapid payment

There are many different names for similar practices of how to consolidate debt without going to other companies but doing it on your own.

You need to list the debt that you have and with the highest interest debt pay that one more each month until it is paid and you move onto the next debt and focus any extra money there. You just need to stop using any form of credit until you have taken back control.

Therefore it is possible to take control of your finances and get the best product that suits your needs.

Debt Consolidation Traps to Avoid

September 14, 2013 by editor

When an unexpected event, such as a temporary drop in family income or an unexpected medical emergency leaves a family with a pile of high interest short-term debt, a debt consolidation loan can be a real advantage. A low interest consolidation loan can improve the family’s monthly cash flow position, and can actually help protect the family’s credit score by heading off the potential accumulation “negative events” on the family’s credit report. Debt consolidation loans can often be paid off ahead of schedule when the emergency that made the loan necessary has receded into the past and financial stability has been reestablished.

That’s the bright side of the debt consolidation story. Unfortunately, statistics indicate that debt consolidation loans seldom work out that well.

Debt Consolidation Loans Are Profitable and Easy To Sell

An underlying cause of most of the debt consolidation traps that cause the majority of debt consolidation loans to do more harm than good is that the people who really need a debt consolidation loan usually have already damaged your credit scores. As a consequence, they can’t get debt consolidation loans from low-cost lender such as banks. A large and highly profitable industry has grown up around making loans to borrowers that must have a loan right now without regard to the interest rate or terms. Specialized debt consolidation lenders know that a portion of the loans they make will be end in default. To ensure their own profitability, they spread the cost of those defaults across all the clients who use their services.

Debt Consolidation Loans Usually Increase the Borrower’s Total Debt Obligation

The higher interest rates and extended loan terms that are parts of most debt consolidation loans made by specialized debt consolidation lenders, may help solve the borrower’s immediate financial crisis, but they are the direct cause of one of the most serious of the debt consolidation traps. Debt consolidation loans almost always end up producing a significant increase in the borrower’s debt repayment cost. If the borrower’s income does not increase fast enough to absorb those costs, they will inevitably end up further in debt.

If The Problem Is Lack of Financial Discipline, a Debt Consolidation Loan Won’t Help

While short-term emergencies often play a role in creating the need for debt consolidation loans, the underlying reason loan is needed is often lack of discipline in making financial decisions. This lack of discipline shows itself in the form of bad spending decisions and the failure to allocate enough (or any) money to savings. The debt consolidation loan may resolve the short-term emergency, but it usually has no effect whatsoever on the borrower’s financial discipline, leading to another of the debt consolidation traps to avoid. The same pattern of bad spending decisions and failure to save will sooner or later result in the borrower once again maxing out available credit and having to take on additional debt.

Using the Family Home to Secure a Debt Consolidation Loan

Of all the debt consolidation traps to avoid, using the family home to secure a debt consolidation loan may be the most dangerous. While securing a debt consolidation loan with the family home may provide the borrower with a better interest rate on the loan needed to manage the current financial crisis, the threat of losing family’s principal financial and psychological asset, will make the borrower all the more vulnerable to predatory lenders when the next financial crisis arrives.

Avoiding Debt Consolidation Traps

When used correctly, debt consolidation loans can be very useful in managing the family’s finances. As discussed above however there are many debt consolidation traps that can make a family’s financial situation worse than it was before they consolidated debts. Here are some guidelines for avoiding those traps:

If you find yourself caught in an upward spiral of debt, find a reputable nonprofit debt counseling service in your community and take full advantage of their services.
Take advantage of the experience of a qualified debt counselor to help you bring the realities of your family’s financial situation into focus.
Make sure you understand the relationship between your family’s regular living expenses and total income. This understanding forms the basis for developing a livable family budget, and determining how much money is available for debt service and debt reduction.
Take advantage of a debt counselor to examine all possible debt management approaches.
Get a copy of your current credit report, and review it to make sure there are no errors. If there are errors, all credit rating agencies have procedures for disputing in resolving them.
Make sure you understand the factors that damage the credit score, and the long-term steps your family can take to improve its credit score.
Before signing any contract for loan consolidation services, make sure the service provider is fully accredited, and check with the local Better Business Bureau to determine how the service provider compares to others in the community.

There Are Ways to Consolidate Debt without Breaking Your Bank

August 7, 2013 by editor

If you have many credit cards with debt on them life can be complicated. Outstanding debt can take over your life- depriving you of things that you would have otherwise liked to do with your money. It often takes a long time to pay these debts off. Some people moreover have debt on a large number of cards, for instance seven different cards. But, despite seeming like a daunting task, debt consolidation is possible. It will take some time to consolidate and pay off your debt, but there are a few ways to consolidate debt that you should explore in order to get out from under debt.

Use Debt Consolidation

Debt consolidation is a one of the most efficient ways to consolidate debt. This involves procuring a loan to repay all your outstanding debt so that instead of several high interest debts you have just one loan to pay off. High interest credit card debt, education loans and outstanding utility debt can be included in this loan, while mortgages cannot. Debt consolidation can be done by:

Major Banks
Non-profit debt consolidation companies
Credit Union

Ways to Consolidate Debt It is a good idea to compare several debt consolidation loans before you decide on one as sometimes debt consolidation companies charge high fees in order to consolidate debt and this may add to your existing debt. However, banks or credit unions have lower interest rates on loans and lower fees. While you do need to demonstrate an ability to pay back your debt consolidation loan and steady income, getting a debt consolidation loan is fairly uncomplicated. Your debt consolidation agency will pay off all your debt on your behalf and you, then, will only have to pay one loan off at a lower interest rate than your credit cards.

Bank on Your Home

If your own your own home, use the equity you have on your home to pay off your outstanding debt. You can borrow, with a home equity or a line of credit, borrow up to 30% of your home’s value. Home equity loan and a home line of credit is a way to unlock the value in your home to solve debt issues. A home equity loan is a close-ended account that has to be repaid over a certain period of time while a home line of credit is an open-ended account like a credit card against which you can repay and borrow against. Home equity loans tend to have higher borrowing limits and low interest rates. This is beneficial as interest rates on home equity or a line of credit is way less than APRs on credit card balances. However, using the value of your home to pay loans does have its risks. If you forestall on payments you could put your house at risk. You may end up with home foreclosure, putting you in a worse position than before.

Borrowing from a Life Insurance Policy

Although this should not be your first choice, borrowing against a life insurance is a viable and preferable option than being bankrupt. You can borrow the cash value of your life insurance and use it to repay your high interest debt. You have to consider, though, that there is an interest on this loan (like any other loan) that needs to be paid at regular intervals. Remember if the loan is not repaid then you will no longer have life insurance for your loved ones after death.

Balance Transfer to other Credit Cards

If you have a card with a big credit limit or are being offered one, consider transferring any outstanding debt to the one with a higher limit. Most companies that you consider moving to will offer you a low balance transfer interest rate, therefore by moving debt you will be saving money. By saving on interest, you may be able to pay debt back sooner.

Borrowing from Retirement

Remember that over all your working years, you paid into your retirement? You can get an advance on this retirement money. But, this really should be a last resort option because the amount has to be paid back over five years. Any money that is not paid back is considered early withdrawal and the amount is subject to income tax and penalty. If you retire the loan must be paid in 60 days or early withdrawal penalties will apply.

What’s Negative about Consolidating Debt

Debt consolidation can provide you with peace of mind and better credit ratings, but each has its benefits and harms. Know the benefits and harms of the debt consolidation method you choose and be sure to pick one that will get you out of debt rather than one that will push you deeper into it.

It is good to know about the several ways to consolidate debt as high interest debt can destroy your lifestyle. But, it is only viable if you are disciplined enough to pay off any debt consolidations as well and you make considerable effort to change your habits to pay off all debts.

Best Option For Credit Card Debt Relief

April 11, 2013 by editor

The best option for credit card debt relief involves getting rid of two things: high interest and irresponsible usage.

Let us begin with the high interest rate. These plastic cards are notorious for accumulating into a big amount in a fairly short amount of time – at least if you continue using it without any payments. If you are currently watching helplessly as your credit card debts are continually increasing, you need to get debt relief help and you need it fast. Even if you are paying the minimum amount stated on your bill, that will not get you anywhere. At the very least, you are only paying of 4% of your total balance. It will take you decades to complete your payments.

One debt relief option that you can benefit from is debt consolidation. It comes in two ways. You can opt to get debt consolidation loans that involves borrowing money that is big enough to pay off your credit card debts. Aim to get a low interest loan so that you get smaller monthly payments. By eliminating the high interest of the credit cards and the fees usually associated with it, you can lower your monthly payments even by half. You can also make steady monthly payments for a maximum of 5 years – since most personal loans are paid off by that time. Of course, the key is the low interest rate that can only be achieved with a good credit score or a collateral.

If you have neither, your other option is debt management. This involves getting the aid of a debt counselor who will review your debts and the finances you will use to pay it off. They will help you come up with a debt management plan that will be submitted to your creditors for negotiation. They will even negotiate to lower your interest rate and if they reach an agreement, that will help you make better progress on your debts.

But while the high interest rate is removed, another aspect that has to be eliminated is your irresponsible use of these cards. If you do not correct these mistakes, you may find yourself deep in credit card debt once more.

Getting rid of bad spending habits should be part of any debt relief program. You need to begin by knowing how much you can really afford to spend. Ideally, using a cash only policy will help you stay within your means. But if you have to use credit cards, make sure that you have the cash in your bank account to pay for the whole balance on the card once the bill comes in. The only way you can eliminate the high interest on your cards while continuing to use it is to pay for it once the billing statement comes in.

Read all the fine prints indicated in the card contract that you will receive after applying for a card. Or if you lost that contract, research or call the credit card company to learn about the fees and charges associated with every activity on your card. And if you know that you cannot control yourself, try not to bring your cards when you go out on regular buying trips. This is how you become a responsible card holder.

Indications That Debt Consolidation Loans Should Not Be An Option

March 26, 2013 by editor

Getting a debt consolidation loan is an effective solution for your credit problem but you have to know the signs if it is not the right option for you. There are many debt relief options and the closest to a debt consolidation loan is debt management. If you want to enjoy the benefits of the loan but you lack certain qualifications, then you should opt for the latter.

So what are the signs that you should not choose debt consolidation?

First of all, you need a steady income to opt for this. A lender will not mind your application for a loan if you do not have this. It should not just be a steady income, but it should be able to cover your monthly payments. If this is something that you do not have, you will not have much luck with debt management too. Your best option will be debt settlement or another debt relief program that will help reduce your balance.

Another indication that debt consolidation loans will not help you is when you have low credit score. It is one of the factors that will affect the interest rate that will be placed on your loan. So if you have a bad score because you have defaulted on your payments already, check if you have a collateral to use on a secured loan. Either one of these will make you a low risk borrower and will prompt the lender to give you a low interest rate. If you have neither, then you should consider debt management.

If you are still incurring more debts, then you may want to forego debt consolidation loans. This is only for those who can stop acquiring more credit. Debt consolidation loans could make you believe that you no longer owe any debt because of the zero balances on some of your cards. Going into debt consolidation requires self restraint and hard work. There are instances when you will still incur debts such as when you are dealing with medical bills. Even if you opt to consolidate your loans, you will still incur debts after the fact. If this is the case, it is better to look into other forms of debt solutions.

One of the other things you should look out for when weighing the option of debt consolidation is when your income is less than your total payables. A high debt to income ratio is not something that can benefit this program. Debt settlement or bankruptcy may be the better option.

Lastly, if you know that you need an expert guiding you, then debt management may be your best chance to completely pay off what you owe. There is not debt counselor involved in debt consolidation loans. Making sure that your monthly payment is met will all be up to you. Controlling your spending to avoid incurring debts is something that only you can do.

There are other debt management options available for you if you seem to not qualify for debt consolidation loans. There are numerous other ways to pay off your monetary obligations and achieve financial freedom. But regardless of what you choose, you need to identify the reason why you got into debt in the first place.

Requirements For Credit Card Debt Consolidation Loans

March 15, 2013 by editor

As a debt relief program, debt consolidation loans can be an effective method – especially with credit card debt. However, like other solutions, you need to have the right requirements so you can maximize the benefits and make sure that you will really get out of debt.

The whole premise of debt consolidation loans is somehow self explanatory. You combine all your debts by taking out a loan. With the funds you will get from it, you will pay off your other credit obligations so you only concentrate on this one payment. Since most loan payments are stretched over a period of 5 years, you can expect that your monthly dues will be lower than before. If you were having problems keeping up with the minimum payments of your credit cards, this will be a welcome relief.

Another benefit that will contribute to lowering your monthly dues is connected to the interest rate. Depending on the type of loan that you will apply for, you should be able to get a low interest – at least if you have the right requirements.

So what are these requirements?

First and foremost, you need to possess one of the two qualifications for a low interest loan. One of them is a good credit score. Having a high score describes you as a low risk borrower so the lender is prompted to provide your loan with a low rate. The other qualification is a collateral. This is to allow you to get a secured loan – wherein interest rates are typically low. This is typical for debts that total to a huge amount. You can use your house, car or any high value asset that you have as your collateral. This is why part of your debt consolidation loan options is a home equity wherein you use the current value of your house as collateral for a big loan.

Any of the two will get you the low interest rate that will make your monthly credit obligations more affordable.

However, there is another important qualification that is usually left out – your attitude. More than the good credit score or the collateral, you also need to have the right attitude towards your debt to be able to conquer it completely. A lot of people fail at debt consolidation because they had the wrong attitude about it.

Your attitude should include determination, discipline and an extreme amount of self control. This type of debt relief program will not involve a debt professional who will monitor your payments and remind you to pay off your dues. All initiatives to pay, keep your spending low and maintaining your due dates will be all up to you. Once you have paid off your credit card balances with the new loan, the temptation to use it again becomes very strong. You need to curb this – otherwise, you will end up acquiring more debt.

While getting out of debt is important, you need to develop the right financial management skills so you can stay out of debt. That is just as important as your efforts to pay off all your credit dues. If you do not put enough attention to this, you may find yourself getting into debt once more.

These requirements are not mandatory but if you want to succeed in using debt consolidation loans as your credit solution, you need all of these (or at the very least, the attitude requirement).

How To Choose Between Debt Management And Debt Consolidation Loans

March 7, 2013 by editor

When you have decided to get rid of your debts, the next decision that you will make is how you will accomplish that. To make that choice, it helps to know the different qualifications that will allow you to successfully solve your credit problems. Some of the options have significant differences in terms of requirements while the others have minimal distinctions.

Two debt relief options that are more similar than the rest is debt consolidation loans and debt management. To help you choose between the two, let us discuss their similarities and differences. There are two factors to consider: process and requirements.

Beginning with the process, they both will lead to a single payment scheme. In debt consolidation loans, you will apply for a loan that is big enough to pay off your other credits. Once they are all paid off, you can only concentrate on the big loan. The effort exerted to monitoring different accounts can now be put into your efforts to grow your debt payment fund.

In debt management, you hire a third party company who will assign a counselor to help you come up with a payment plan. The debt counselor will negotiate with the creditor to allow you to lower your monthly dues by increasing the length of your payment period. For a minimal service fee, you will send the total amount of your monthly debt payments to the counselor who in turn, will distribute it to the creditors that you enrolled in the program. Since they are taking care of the details, you can also concentrate on growing your income so you have more to use on your debts.

Both of them will aim to give you a lower interest rate. However, this is more controlled with debt consolidation loans. Naturally, you will choose the loan that will give you a low interest rate. In debt management, you leave it in the hands of the creditor. The counselor will help you negotiate but there are no guarantees.

In terms of the requirements, you need to have a steady income for both of them. They will not reduce your debt balance like debt settlement. You will just be shifting your debts around so you can benefit from the single payment plan. The difference between the two is the additional cost required in debt management. You need to pay for the service fee of the counselor – who is helping you distribute payments and communicate with your creditors.

In debt consolidation loans, you need either a good credit score or a collateral so you can enjoy a low interest rate on the loan that you are applying for. These two requirements are not necessary to get a loan approval but they both will make you a low risk borrower. By being such, you can be given a low interest rate on your loan. If you are a high risk borrower, the lender has to protect their investment because the chances of you defaulting on your payments is more likely. A high interest rate will give them this security.

These are the main similarities and differences of debt management and debt consolidation loans. Choose based on what program you think you can finish. It is important to select the one that will help you learn your lesson. More than anything, you need to learn how to stay out of debt – even as you are paying off the current one. Regardless of your choice of debt relief, this is vital for you to truly achieve financial freedom.