When you have two or more debt payments monthly that you would like to combine into a single one, when you wish to pay off an existing debt faster, or when you want to reduce your monthly debt payment, debt consolidation loans are the right choice for you. Basically, debt consolidation refers to paying off several loans by taking out another one. When individuals are interested in securing a lower interest rate, servicing one loan only, or securing a fixed interest rate, they resort to debt consolidation loans.
Debt consolidation loans can refer to an unsecured loan formed from several unsecured loans, or to a secured loan, with an asset serving as collateral. In most cases, the asset serving as collateral is a house, and secured loans have a notable advantage, that of the interest rate being considerably lower than with unsecured loans.
In theory, debt consolidation loans are to be taken out by individuals who are paying a credit card debt, because the interest rates of credit card debts are much larger than those of even unsecured loans form a bank or another financial institution. Many people who spend more than their income, and are therefore in credit card debt choose to take out a debt consolidation loan to solve their problems.
Although many people with bad credit history will not be granted another loan, there are lenders who offer debt consolidation loans to this category of borrowers as well, provided they agree to pay a higher interest rate and respect some extra restrictions on how to spend that money.
As mentioned before, debt secured loans can secured or unsecured. An unsecured loan comes with certain risks for the bank or any other financial institution representing the lender, because the loan is not secured against any asset. In the case of secured loans, individuals will be required to use their property as security, giving the lender the ability of balancing the risk that lending money to you poses.
The amount of money that can be borrowed with secured loans varies to the individual's specific circumstances and to the lender's policies. The amount that you can borrow, as well as the Annual Percentage Rate and the term available will typically be influenced by more than just your circumstances. The lender's ability to repay the loan, as well as the value of his/her property are very important in determining the amount of the loan that the lender is willing to give you.
Secured loans allow a larger amount of money to be borrowed, as well as a longer period of time for repaying it. Given the fact that the lender has the benefit of security given by your asset, there are very few limitations to the purposes that you can use the money from secured loans for. Those who find it difficult to get a personal loan, or any other type of loan on account of the fact that they have just changed jobs, they have had problems in their credit history or they are self-employed, should trying to apply for secured loans.
Finding a good debt consolidation loan or a secured loan may be easy, because there are many financial institutions willing to lend you money on their terms. What you need to do is to find as much information as you can in order to make a good choice, or let specialists recommend you something. But above all, you have to make sure that you pay regularly and in full to avoid running the risk of losing your home, if that is the asset you have secured against the loan.
Best Debt Consolidation Loans
A debt consolidation loan can be a powerful answer to the huge amount of debts people are facing these days. Whether it is debt from credit cards, outstanding loan payments or medical expenses, a debt consolidation loan can certainly help in taking off the burden to an extent. However there are many lenders that offer a debt consolidation loan. How does one shop around for the best loan?
Tips to get started
There are many ways in which you can empower your first experience in shopping for a debt consolidation loan.
? Low interest rates: This should be the very first criteria you will check in a loan. The rate of interest will determine the amount of monthly payment you will need to make. It will also have a significant impact on how much money you're going to save each month, not to mention planning for your finances.
? Know the value of your property: The secured debt consolidation loan requires you to submit some form of security ? usually in the form of the existing property you have. However, before you even start looking around for a debt consolidation loan, you need to ascertain the appropriate value of your current property. This will help you negotiate for a good offer and a good amount on the loan as well.
? Never accept the first offer: This is one of the biggest mistakes people make while shopping for a debt consolidation loan. You need to look around for the best available deals in the market and find one which is best for you. Accepting the first offer is the worst thing you can do.
? Get free quotes: Every borrower is entitled to ask for a free, no obligation quote from a debt consolidation loan lender. Therefore, make sure you ask for quotes from at least 3 different lenders. This will give you a fair idea of the going rate and will also help you compare.
? How much debt to be consolidated: Before you start shopping for a debt consolidation loan, you will also need to determine the amount of existing debts you wish to consolidate. After this, you will also want to decide on the lowest amount you can take on.
? Use the Internet: The Internet can be a great place to do a comparison on various lenders for a debt consolidation loan. Most of the websites have application forms which you can fill up online itself. You can get a response in an instant as to whether you will qualify for the debt consolidation loan or not. These online lenders will also provide you with customized loans depending on your income, financial situation, goals etc. Therefore this way you can make a better informed decision as well.
? Get the help of a broker: Hiring the services of a lending broker will stand you in good stead. Typically these lenders have numerous contacts as far as lending companies go and they can help you find the best deals possible.
Both Groshan Fabiola & Alan Lim are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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