What Are Debt Consolidation Loans?
Debt consolidation loans let you combine all debts into one large loan. A company or bank loans you money to pay off your creditors or pays off all your creditors and you only owe one amount. For example, if you have a personal credit of $6000, credit cards debts of $3000, and $1000 in store bills, you could get a loan of $10 000, pay off your debts and owe only the $10 000. While you would owe the same amount, you would likely enjoy a lower interest rate and might even have more time to pay off your debt. Better yet, with debt consolidation loans, you only make one payment a month, which even helps you save on the interest you would have to pay if you had several debts. Debt consolidation loans are not magic: they will not eliminate or even reduce your debts. They will only make those debts a little more manageable. When considering debt consolidation loans, you should look for a fixed interest rate. You should also look for a debt consolidation loan which lets you debit your monthly payment directly from your account or work payment. Debt consolidation loans can be arranged through banks and through private companies. Private companies may give you better rates on debt consolidation loans but your bank may be able to offer you more options and may be a more secure place to get a loan. What rates you get with debt consolidation loans may depend on your credit rating. If you are considering debt consolidation loans, you should carefully calculate how much you would save each month by having this loan instead of your current payment arrangement. Only opt for debt consolidation loans if you would pay less in interest than you are paying now. Before deciding on debt consolidation loans, you should shop around to find the best deal. Any company or bank you approach should give you a rate, a minimum monthly payment, and information about penalties incurred if you miss a payment or switch loan providers. You should only consider debt consolidation loans from companies that are reputable and offer good rates and good terms. If you decide to use debt consolidation loans, you should try to pay them off as quickly as you can. As with any debt, you are paying interest that grows. If you have decided to use debt consolidation loans, you should also avoid all new types of debt as you pay off your loan. Otherwise, you may find yourself in a new financial problem. On the other hand, if you use debt consolidation loans wisely, you may find you get a new lease on your financial life.