Debt consolidation loans are one of the most feasible ways to resolve your financial crisis when you are burdened by several outstanding loans. Like all other loans, a debt consolidation loan would also require you to pay a monthly interest to repay the loan. However, the monthly interest rate of a debt consolidation loan is much lower than what you accumulated while paying off multiple loans of variable interest rates.
In order to make it easy and flexible for the borrowers, debt consolidation loans offer many options to choose from, through which the borrowers can repay their loans. If you own a home, there are several ways in which you can apply for a debt consolidation loan. The options include line of credit, a home equity loan or refinancing of your existing mortgage. Obtaining any of these three will enable you to pay off all your consumer debts.
For those who do not own a home, debt consolidation loans have a variety of offers for them as well. All non-home owners can reduce their interest rates by using a new credit card or a personal loan. A little bit of shopping around can easily get you the best deals and the lowest rates.
While opting for a personal loan online, you may be eligible for a loan up to $ 10,000 on the same day. Some firms may even transfer the money to your account on the same day. Your income history and credit ratings will play an important role in determining your eligibility to apply for the loan amount.
Those with good credit scores can apply for a personal loan through a credit union or their own bank. Lending requirements vary from one bank to another. Credit unions usually offer lower rates than banks and since they are highly preferred. Individuals with lower credit scores can obtain the loan through a bank or credit union only if they have a collateral. Collaterals can include your personal property that has a good market value. Sometimes you may also offer your vehicle titles as the collateral.
In case you have a good credit history but do not own any property, you may also consolidate your debts through credit card balance transfers. This facility allows you to transfer your high interest credit cards to low interest credit cards. Some companies will even allow this transfer in 0% interest for at least a period of six months. This will reduce your monthly payment for six months. However, in case of a late or skipped payment you may be charged an interest.
It is advisable to check whether you can transfer your balance from your old account to the new one before opening it. In case you have both the accounts with the same financing company, you may not be allowed to transfer your balance. You also need to be careful about the increase in the interest rates after the introductory period gets over.
The interest rates of debt consolidation loans may vary up to 10 points on credit cards as well as on personal loans. You may get the best deal by a thorough online research and by comparing the quotes.
In case you are faced with a situation where you have exhausted every option of debt consolidation, you may opt for a non-profit service. Although these organizations may not be the best source of consolidation, at times they tend to negotiate better rates with your creditors in reducing monthly interests and waiving off late fees. The reputation and the influence of the representatives of a non-profit debt management service help them do the job better than you. It is advisable to pay off your loans as soon as you receive the money and close the debt accounts so that you can improve your credit scores. It can be equally helpful for you if you start paying off your debt consolidation loan through extra payments so that you can save on your interest charges and get out of the debt very soon.