Get Out of Debt with a Debt Consolidation Loan

  • Are you drowning in debts?
  • Do you have to make several payments every month?
  • Are you looking for a way to save on monthly loan repayments?
  • Do you want the simplicity of having to deal with just one loan lender?

If so, can help you obtain an easy debt consolidation loan.

If you owe money to numerous lenders or if you are carrying high balances on several credit cards, you may want to consider applying for a debt consolidation loan. In addition to the possibility of securing lower interest rates and more convenient loan terms, you may also end up lowering your monthly payments significantly. Add to that, the benefit and simplicity of having to make just one loan payment every month.

Some of the advantages of debt consolidation include:

  • One simple payment to one lender makes
    your life much easier and also enables to budget and plan effectively.
    Eliminate the hassle of having to pay numerous lenders.
  • Lower monthly payment by negotiating lower interest rates and more favorable debt consolidation loan terms.
  • Improve your credit worthiness by consolidating all your monthly payments and freeing your balances.

It is critical that you read the fine print, however, before signing up for a debt consolidation loan and ensure you don’t end up paying more than what you currently owe. Create a comprehensive spreadsheet to calculate the advantages and disadvantages of consolidating your debt.

Based on some detailed number crunching you should make sure it is in your interest to apply for a debt consolidation loan. Another caveat — once you apply for a debt consolidation loan, create a comprehensive plan to repay the debt in as short a duration of time as possible to avoid ballooning your debts even further.

When a Debt Consolidation Loans Makes Sense

You should consider a few things when doing your calculations. These include the interest rate on your loans or credit cards, the number of months left to pay, and how much you currently pay toward the loans each month.

If you have multiple high-interest credit cards and only pay the minimums each month, it can take you 20 years or more to pay the debt off. On the other hand, if you can keep your monthly payments around the same amount or a little higher you can pay your debt off much faster and save lots of money in the long run.

Plus, if you qualify for a lower-interest rate you can even lower your monthly payments and save money now. Also, don’t forget to factor in the costs of late fees. Many times when you have multiple payments each month, you forget to make a payment on time and it costs you. Lenders charge you late fees or increase your interest rate. Either way, you end up paying more for your loans.

Go back at least 12 months and see if you’ve paid any extra fees on the debts you want to consolidate. Also, review if the lender has raised your interest rate as a consequence of a late pay.

Debt Consolidation and Credit Scores

A debt consolidation loan can also improve your credit score. If you pay off your credit cards, but don’t close them, your credit utilization decreases and your credit score increases. Credit utilization is how much of your available credit you actually use.

For example, if you have a credit card with a $1,000 credit limit and only carry a balance of $300, you only utilize 30% of your credit. ($300 is 30 percent of $1,000). Most credit experts advise you to utilize less than 30 percent of your available credit to maximize your credit score.

In addition, when you get approved for a new loan your credit score goes up. However, make sure you make your new loan payments on time or it will drop even lower.

Secured and Unsecured Debt Consolidation Loans

As with personal loans, debt consolidation loans also come under classic secured and unsecured varieties where a secured loan is backed by collateral, whereas an unsecured debt consolidation loan is not backed by any collateral.

Collateral is an item that has value, including a house, car, or other piece of personal property. If the loan is not repaid the item is repossessed by the lender to pay off the remaining balance.

If you don’t use collateral you’ll need a strong credit score to qualify for an unsecured loan. If you’re credit score is high – above 700 – you can get better rates. Otherwise, your interest rate goes up as your credit score goes down. A higher interest rate leads to a higher monthly payment.

If you are not sure where to start, has assembled a solid network of lenders. Complete one simple application and we’ll get you in touch with these lenders.

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