Knowing When to Get a Debt Consolidation Loan

Some people have the best of intentions when they go about getting themselves into troublesome debts. In fact, many people do not even realize they are in over their heads until it is too late.

A great way to pull one's self out of debt is by taking part in a debt consolidation program. This type of program comes in many forms, and it also has its pros and cons. Knowing when to take part in a consolidation program is the first step in identifying whether or not it will help a particular debtor. If it is determined this type of program can be valuable, debtors should jump head first into one; however, if it is determined that the cons outweigh the pros, sometimes filing bankruptcy can be very advantageous when it comes to clearing debt.

Why You Need a Debt Consolidation Loan

If a person has found him or herself drowning in debt, and he or she knows that lower interests rates on the debt cannot be obtained, then turning to a consolidation loan may be a beneficial decision to make. This type of loan is especially advantageous to people who have an assortment of bills with high interest rates, are unable to afford these bills but at the same time want to avoid bankruptcy.

By combining a consolidation loan with credit counseling, many debtors have found this to be a great way to rid of their debt in a minimal amount of time. In fact, many debtors have been able to successfully complete a consolidation loan program in as little as five years. 

Why You Don't Need a Debt Consolidation Loan

The only instance in which consolidation loans are advantageous are when a debtor has the ability to make the loan repayment. If, for any reason at all, a debtor thinks he or she is unable to repay the loan, then it is best to steer clear of taking part in a consolidation program. By missing a payment, the debtor will reap severe consequences, including cause him or herself to go further into burdensome debt.

It is very important for debtors to keep in mind that consolidation programs are financial products. The people who make them available to debtors are doing so in order to make money for themselves. Debtors should always calculate the math before taking part in a consolidation program. If, overtime, the program is only going to cost the debtor more money than what he or she is currently in debt for, then the program should be avoided at all cost.

Another reason debtors should avoid consolidation loans is because the programs do not change debtors' spending behaviors. When they get themselves out of debt by successfully completing the program, the only thing that happens is they end up going back in debt. For example, a debtor pays of his or her credit cards only to run the bills back up on them. If a person does choose to take part in a consolidation loan program, he or she should cut up all credit cards except one for emergencies.

Consolidation Loan Tips

1) The best way to go about getting a debt consolidation loan is to first speak with a consolidation specialist. He or she will be able to explain the ins-and-outs of a consolidation program as well as evaluate a person's exact financial situation.

2) It is important to remember that taking out a consolidation loan will at first have a negative impact on the debtor's credit score; however, overtime, once the program is completed, the credit score will increase.

Summary

There is no denying that debt consolidation loans have their pros and cons. For some people, these loans can be life-savers. For others, they can cause a person to sink further into debt. Before taking part in a debt consolidation program, it is always best to carefully evaluate the advantages and disadvantages.

How to Choose a Credit Card Consolidation Loan

Dealing with credit card debt is never a walk in the park, but when you have the right resources and knowledge, getting rid of it can quickly become a thing of the past. You will find plenty of debt consolidation loan commercials on TV, find brochures at your bank and find ads online and in your email inbox. But are they all the same? How do you choose between one credit card consolidation loan from the next? With a credit consolidation loan, you will be able to pay off your credit card debt, but you'll find that there are different amounts you can borrow, repayment periods and interest rates associated with them. Let's take a look into how you can choose the best one for you.

Find Out the Interest Rate of the Loan 

The first thing that you should do before applying for a credit card consolidation loan is to learn of the interest rates associated with it. This will determine how much you will have to pay over the duration of the loan. Obviously, the higher the interest rate, the higher your monthly payments will be. You'll need to ensure that you're getting the best rates and that you can afford it. You can do this by shopping around to see who has a low interest rate. Keep in mind that you may not qualify for a loan with a low interest rate because of your bad credit score.

Do You Quality for a Consolidation Loan?

When you fall behind on your credit card payments, your credit rating will suffer tremendously. This means that it could be difficult or impossible to get a credit card consolidation loan. A lot of lenders won't allow bad credit borrowers to take out a loan to pay off secured debt, such as a mortgage or auto loan.

Is it a Consolidation Loan or Credit Counseling?

Don't get confused when looking around for credit card debt help. You will find that some credit card consolidation programs work more like a credit counseling program, where it will take all of your credit card debt and combine them into one, allowing you to pay only one monthly payment. Make sure to ask whether your debts will be paid off right away or over an extended period of time.

Find Out the Repayment Period

When you get a credit card consolidation loan, the monthly payments are lengthened over a specific time period. This means that it will take you longer to pay off all of your credit card debt. However, your monthly payments are much lower, making them more affordable. This is good for those who need to get their finances back in order. Then once you're back on track, you can start paying back the loan quicker.

Considering Alternatives

Credit card debt consolidation is only one way to handle your credit card debt. You should figure out if a consolidation loan would be best for your situation. Otherwise, you can find other financial services like credit counseling, which is sometimes a better option. Some people even try to put together their own debt repayment plan, but you will need to have great discipline to do this by yourself.

Is the Credit Card Consolidation Lender Legit?

You don't want to fall for the many gimmicks that are out there. Be sure that the lender you are considering is indeed legitimate. This can be done by avoiding companies that request upfront fees to be paid for a secured loan. If things seem fishy, trust your gut feeling and go elsewhere.

 

Lastly, you want to make sure that you're able to afford the credit card consolidation loan, so don't forget to factor that in.

First Post

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