Debt Consolidation Loan

Managing multiple debts can be very difficult to keep up with. You need to remember when payment is due, who the debt is owed to, how much is debt is remaining. You may also be paying more than you need to be. If this sounds like you – then a debt consolidation loan is the right choice for you.

A debt consolidation loan allows you to consolidate all your debts into one loan making your monthly payments less and more manageable. With one monthly payment and a fixed monthly payment schedule, you can get yourself out of debt quicker. The main objective with a consolidation loan is to lower your overall payments. This can be accomplished by focusing on a couple of things such as getting the lowest interest rate possible and having a plan to pay off your debts in 3 – 5 years.

Why get a debt consolidation loan?

The obvious reason to get a debt consolidation loan is to get out of debt as soon as possible. The idea is to borrow one lump sum of money to settle your existing debts then pay back one monthly repayment to the finance company who lent you that lump sum. Debt consolidation allows you to get out of debt and provide you a fresh start.

Types of debt consolidation loans available to you:

Home Equity Loans

A home equity loan essentially allows you to borrow against the value of your property less the mortgage balance. The two main kinds of equity loans. The first is a Home Equity Loan. This type of loan is a fixed amount of money for a fixed period of time (sometimes at a fixed rate). The other one is a Home Equity Line of Credit. This is where you borrow up to a pre-approved credit limit (interest rates usually variable) and can borrow again if you still have money available.
The benefits of these loans include attractive rates and low payments. Interest rates are often variable, however, be aware that there’s always the risk that you can lose your home if you can’t pay.

Refinancing Cash Loans

Refinancing your home and taking out money to pay off bills is another way to use the equity in your home. Quite often the interest rate you are paying on the multiple debts you have is quite high. If you can refinance at a substantially lower interest rate, you’ll eliminate the high interest costs of the debts you pay off. This generally means that you can obtain a lower monthly payment than you currently have.

Interest Only Loans

An interest only loan allows you to repay the interest of the loan only for a certain term. After that term expires you will be required to pay back the principal. The benefit of an interest only consolidation loan is that you repayments are low. Lowering your repayments can free up money to put towards other things such as nest eggs.

Personal Debt Consolidation Loan

A personal debt consolidation loan is either a secured or unsecured personal loan. Finance lenders generally place higher risk on these type of consolidation loans which is why the interest rates are higher than a home loans. The more risk a financial lender has to take the higher the interest rate. If the term and interest rate is ok for you, this can be a great way to actually save money in the end

Debt Settlement

Debt settlement is another option that’s become increasingly popular with consumers who have a lot of debt and can’t, or won’t, file bankruptcy. You stop paying your bills and instead make a regular monthly payment to the settlement company such as Baycorp. Your creditors contact them, and not you, about your overdue bills.
Be aware that your credit rating will be affected. You will be subject to what’s known as Bad Credit. This will affect your chances of getting a mortgage or any other loan from a bank such as Kiwibank, National Bank, ASB, Westpac, in fact all banks regardless. Renegotiate with your current financial lender.

If your debt problems relate to your mortgage, then the only way to consolidate your debts or improve your situation might be to negotiate your current terms. Most mortgage lenders would rather renegotiate than repossess your home, as they will lose out if you default. Stretching out payments may help you to better manage your debt when you need to the most.

Mistakes people make when it comes to debt consolidation include not having a plan for paying the debt off after they’ve consolidated, and procrastination. Don’t wait for the perfect solution to come along. Doing so will always put you further into debt.

Make a plan – stick to it, and start getting out of debt now with a debt consolidation loan.

For further information on debt consolidation please visit debtconsolidationcare