December 18, 2017

Are Debt Consolidation Loans Right For You?

Debt is one of those things that does not seem like a big deal, and than the ext thing you know you are drowning under it. All of a sudden it does not seem like you job pays enough and you start looking for a part time job. On possible solution that has the potential to simplify your life are debt consolidation loans.

Many people make the mistake of assuming that when they consolidate their debts, they are making their debt load smaller. This is not strictly the case. While there are times when the debt consolidation company might be able to negotiate with your creditors to get a reduction of interest, you are still going to be required to pay off the principle and a majority of the interest.

One of the things that consolidating your debt does is make it so that instead of making multiple payments on multiple loans being made every single month, you will only have to worry about paying on large payment a month. This payment is than divided amongst your creditors. Once this is done, you and your financial adviser can discuss the possibility of a loan that will pay off the debt.

For many people, a loan that pays their entire consolidated debts load is the answer to all of their problems. Many creditors are happy to discuss a significant reduction in the amount of interest they are owed if they know that they will be getting paid off in a short period of time. Having the interest reduced makes a huge impact on the amount of money you need to borrow. You will still have to repay the loan, but at least you will not have to worry about creditors calling you at all hours of the day and night.

Even though you still are not free of debt, you have to repay the loan, you are not usually in as deep a debt as your were before you paid off your creditors. The reason for this is interest rates. The interest rate on your new loan should be considerably less then the interest rate you were paying before you consolidated and paid off your pre-existing debts.

Taking out a loan to pay off your pre-existing debts is not always a safe choice. Since you are already up to your ears in debt, you are on shaky ground with regards to approval. You are probably going to have to put up some sort of collateral. Usually this collateral is your home. Considering that the credit card companies can not touch your house this might not be the safest option.

It is in your best interest to pay off the loan as quickly as you possibly can. The best way to do this is by adding a little bit extra to each months payment. Even if all you can afford is an extra five dollars a month, it will add up. Also plan on making your monthly payment a minimum of a week in advance. The last thing you need is to have a few payments be late and for you to start amassing late fees.

You want to pay off your debt consolidation loans as quickly as you can. Even if you can only afford to spare $5 a month, you should add it to the monthly payment. All of these little bits of money add up and you will pay off the loan and be debt free sooner versus later.

Learn more, click here: http://www.hcd.ca.gov/

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