If you watch television or make your mail lately, you know there are many companies eager to consolidate your loan to cut your payments in half, “lower interest rates” and “help you out of debt quickly.” By the way, consolidating your high interest rates on loans and credit card debt into a loan with lower interest rates and more manageable payments makes sense. Unfortunately, it doesn’t always work like that. Many people who consolidate their loans pay much more than they would have paid. In the case of home equity loans, a worrying number of borrowers are losing their home. Add to this the fact that many so-called “consolidation” programs are not really consolidated loans, and debt consolidation legally has a bad reputation. However, you can benefit from consolidation if you explore your options and continue with caution.
1 Get your credit report and your Falcom score.
Any loan you get will usually be based on your credit report, so you need to find out. However, if your credit report shows that you have a good score and have a reasonable rate of credit, you can easily consolidate loans at a low rate, especially if your credit has improved since winning their loans. Review your entire credit report carefully to make sure it is correct. Inaccuracies can hurt your score and not allow you to get the rate you deserve.
2 Consider all your options.
Before leaping into debt consolidation debt, think of your other options:
If you just want to save money and you’re not in a hurry, just pay your debts quickly by prioritizing them. Pay monthly as much as you can on your higher rate loans, while you pay the least on the other. This way you can reduce your monthly financial co-payments as soon as possible.
Call your credit card company. If you have relatively good credit, you can talk to your credit card company and negotiate a lower interest rate. If you don’t get a lower rate, you can transfer your balance to a credit card with a lower long-term rate or an interest-free entry fee. Make sure you know what your rate will be after the initial phase.
Contact a credit advisory agency. A suitable credit counseling agency offers you free or low cost advice on how to manage your debt, and can help you set up a budget to keep your finances under control. Credit Counseling does not mean you are entering into a debt management program, and you need to be aware of any organization that you want to get into a program right away. Generally, be careful when choosing a credit advisory agency. Even registered non-profit agencies often charge high fees.
Sell Your Car If you can’t afford to pay for your car, try selling your car to pay off your loan. If the car is seized, it will eventually cost you even more money.
Talk to your mortgage lender. Good reputation mortgage lenders will work with you if you have temporary payment issues. Call them as soon as you know you have problems and they will temporarily suspend your payment or accept reduced payments. You can also extend the time of your refund so that you reduce your monthly payments. Be sure to find out if there are additional fees or penalties for any settlement, and consider refinancing your home if you get a better interest rate.
Borrow from your life insurance. Policy for a lifetime, allows you to borrow against the cash value of the policy. This easy loan, usually of low interest, can give you quick money to pay off your debt. Make sure you check the tax involved in the loan and understand that if you do not repay the loan, you will be deducted from the amount your beneficiary receives.
3 Understand the difference between a loan consolidation, a debt management program and debt negotiation.
Companies that claim to be able to help you reduce or get your debt quickly can pretend to offer consolidation loans – may the name “consolidation” in its name still actually use methods such as debt management , sink, and even bankruptcy. These are the essential differences between these options:
A consolidation loan is merely a loan that writes off other loans. Once you consolidate a loan, you owe the money to the new borrower, not the original creditor. A loan consolidation can lower your monthly payments, either by reducing your interest rate or by extending the repayment period, but amortizing the other creditors. Consolidation loans can temporarily damage your credit, but usually not to the point of debt management or debt negotiation programs.
Debt management programs can also reduce your payments, but they work differently. A debt management agency acts as an intermediary between you and your creditor and tries to negotiate a reduction in the interest rate or fees on your loans. Then pay an agreed amount to the debt administrator or credit counseling agency, and they will distribute the payment (usually less one fee) to your creditors. Participation in a debt management plan usually appears on a credit report and may adversely affect your credit rate.
Debt negotiation is the act of blaming less than you owe. Pay a portion of what you owe to a creditor and clean the rest of the debt. Credit card companies usually offer a fixed lump sum as a way to recover from their losses. While you are less, an arrangement can seriously damage your credit. Worse, third party companies that offer debt negotiation are known to deceive practices as consolidation, and these companies usually charge excessive fees while sharing only payments with your original creditors, sometimes failing to disclose any differences in terms of refund negotiation.
4 You want to pay off your debt quickly.
One of the most beautiful features of loan consolidation is the potential for lower monthly payments. But if the reduced payment is just the result of prolonging your repayment for a longer period, you will surely pay, with the consolidation you will have anyway. Solve your budget and set your monthly payment as high as you can. This will ultimately pay less, and it will quickly be out of debt.
5 Get the right loan for you.
Loan consolidation can be assured (backed by collateral) or unsecured (usually called “personal loans”).
Secured mortgages If support secured credit lines or equity loans, interest rate interest rates as loans will decrease uncertainly because if the borrower is behind on the loan, the borrower can recover the money by selling the underlying security. Interest on equity loans will also be deductible, an aspect that can save you money. However, keep in mind that if you fall back on an equity loan, the borrower can relate to your home. Consider, carefully, in danger before choosing a secured loan. Also, keep in mind that such loans may include hidden fees such as “points” (one point equals one percent of the loan amount), which may increase the value of your loan.
Unsecured loans are safer options, as you should not compromise your home or any other property. If you have good credit, you can receive a decent rate (at least compared to the credit card) on a personal unsecured loan. Depending on your situation, but especially if you have poor credit, you can find that only a secure credit will get a lower amount than you pay at that time.
- The borrower can give you the total cost of the loan, but if not, it’s easy to calculate. Multiply the monthly payment by the number of months in the loan, then add any fees or points. It is a good idea to do so even if the borrower quotes you as a total cost.
- There are online calculators with which you can compare the cost of your current debt with the cost of a consolidation loan, but be careful with this. Some of the borrowers’ websites accept a low rate of loan consolidation and high fees for other loans. Although this is the case, it is not always the case, and you will not get an exact comparison if you do not correctly enter your interest rate. Also make sure you add the rates.
- Those in some borrowers’ websites accept a low rate for the consolidated loan and high interest rates for their other loans. Although this is the case, it is not always the case, and you will not get an exact comparison if you do not add the right interest rates. In addition, be sure to add any rate.
- When deciding on a monthly payment, you should give yourself a security pillow, especially for a secure loan. While you want to repay your debts as soon as possible, you don’t want to get into a situation where you can’t pay what is needed if something unexpected happens.
- If you’re not familiar with a lender, do some research. See if there are complaints by the “Better Business Bureau” or the “Federal Trade Commission”, and examine the internet to see if you find relevant information about the borrower. However, regardless of the borrower, make sure you fully understand the terms of your loan.
- Treat debt consolidation as a way to write off your debt, not as a way to save extra money to spend. You need to control your spending, or you’ll be paying more and more debt.
- The worse your credit is, the higher the interest rate you will have to pay. It also seems that the worse your situation is, the more companies are interested in taking advantage of you. Be realistic, but be sure to explore all your options. Above all, make sure you understand all the terms and conditions of your loan and be wary of excessive fees.
- Be concerned, the symptom may be a bigger problem unless you solve the underlying problem. You will fall into debt again, just because you will get the loan consolidation with the others. Make a spending plan, make a budget, and keep it for a few months before consolidating your debt, to prove that it will be a possible route for you.