Quenching monthly budget, spending salary only for paying off different debts, obtaining threatening calls from the creditors-these are very common scenarios when a borrower becomes overburdened with lots of unpaid debts. In such cases, debt consolidation loans aid borrowers to purge the situation.
As a part of debt management program, debt consolidation loans enable borrowers to resolve their debt dilemma. In this program, a separate loan is given to the borrower. This loan merges his various loans into a single single loan and after that the borrower needs to pay only on that single one. Suppose a person has three different debts, a loan, a credit card balance and a store card balance. With the help of these loans all three different payments will be combined into one with a different but lower interest rate.
Why one should opt for debt consolidation loans? The answer is so simple, only for getting financial freedom and saving money. Credit card bills mean existence of finance charge, loans mean existence of various interest rates. Ultimately, all indicate a big monetary burden. But, by opting for debt consolidation loans, borrowers can consolidate all payments into one monthly payment with a fixed rate. It means, instead of several payments making a single payment and reducing the financial burden. And therefore, borrowers can save their money and set all sorts of debt derivatives.
However, in order to get a debt consolidation loan, a borrower needs to qualify some pre requisite criteria. Such as, he must have to present a copy of his monthly budget needs, while applying for these loans. This copy indicates whether the borrower will be able to pay off the loan or not. Beside, having a permanent source of income is also mandatory. Debt consolidation loans are offered both in secured and unsecured form. So, opting for the secured option one needs to pledge something as collateral.
The main function of debt consolidation is to consolidating debts. All types of debts including credit card bills, medical bills, personal loans, student loans, bounced checks can be consolidated. The amount one can borrow with this loan is ranged from ₤ 5000- ₤ 75000 along with a repayment period of 5-25 years.
Undoubtedly it can be said that debt consolidation loans are providing an exclusive proposal to resolve all kinds of debt confusions. Mainly, one of the following three proposals a borrower can take while applying for a debt consolidation loan,
oMaking payment easier and affordable
oReducing the interest rate
oRepaying balance quick
Debt consolidation loan is an important tool of debt management program. But borrowers should remember that this program will not eliminate their debts but it will help them to solve their debts problems and pave their ways to live a debt free life.