Debt Consolidation

Supervising numerous debts and monthly repayments to different loan servicers is an overwhelming task that, unfortunately, plenty of people have to deal with every day. If you’re stuck in endless-seeming debts, loan providers offer a grandiose way out. Consolidating them into one debt you’ll be able to oversee the progress made with your payments. Undoubtedly, this will facilitate your mental state. To get the most out of debt consolidation loans, get detailed information on them.  

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Personal loan as a means of consolidating debts

Debt consolidation loan lenders offer as much money as the applicant needs to pay off all his debts and start to repay the loan afterward. Beyond any comparison, this is more profitable and helps you get rid of the entire hustle and bustle of running from one loan servicer to another every month to pay down the debts. For instance, if you have several credit card debts, each with about 12% APR, you can hardly ever get rid of the principal amounts. All that you’ll manage to pay are the interest rate and the APR. Once you get a single, yet large, personal loan with only 7% APR, you’ll be required to pay only this one and save on the interest rate. Nevertheless, don’t forget that consolidation loans are simple loans and need to be repaid. If you fail to repay them, the interest rates will increase significantly.

Debts possible to consolidate

Prior to applying for a consolidation loan, it’s highly important to make sure the interest rate of the new loan is lower than the interest rate of your old debts. Otherwise, there’ll be no savings observed. Here are the main debt types applicants find beneficial to consolidate.

1.     Personal loans. It's easy to take personal loans whenever you need them. Yet, with time passing, you’ll find there are too many personal loans to repay and very little chances at that. A debt consolidation loan will unite all these loans and make it easier to keep track of the debt.
2.     Credit card debts. Credit card debts are very common among Americans as they’re easy to get. Yet, these debts also charge very high APRs. Keeping track on all of their timely payments can be burdensome.
3.     Student loans. Private education loans, unlike federal student loans, can be consolidated. Moreover, this turns out to be very practical and convenient.

Debt consolidation options

When choosing a debt consolidation type, you should take into consideration the amount and kind of debt. The main alternative ways are as follows:

1.     Secured loans. These loans are provided by lenders who take the equity found in your home or the value of a vehicle as a mortgage. Secured loans, as a rule, are provided with lower interest rates. What stings the most here is the possibility of losing your asset should you fail to fulfill the repayment.
2.     Credit card balance transfer. Another great variant is to get a credit card that allows you to pay off the debts on other credit cards with a promotional balance transfer. Such credit cards require either little or practically no interest in transferring the balance.
3.     Student loans. Unfortunately, it’s impossible to consolidate federal tuition and private tuition loans, yet combining the latter with other debt types will help you to get rid of extra interest rates. This can be done during the first six months after graduation when you already have your job position.

Consolidation loans for bad credit history

There are private lenders and credit unions that offer consolidation loans for applicants with bad credit histories. Yet, it's crucial to remember that for such loans the APR is higher. Taking a consolidation loan does not mean getting rid of all debts. It simply implies having all of them bundled into one with a somewhat lower interest rate. Be aware not to miss the payday to avoid incurring a higher interest rate—and thereby defeating the purpose of the loan consolidation. Formulate your budget and devote a portion of it to your loan payoff. If the payments appear lower, find out the reason. There are only two possibilities: either you have an extended loan term or a lower interest rate. If you’re "saving" on the account of a longer-term loan, you'll end up having paid more interest.