A debt consolidation loan is a smart option for those who have several different outstanding debts, including multiple credit cards with high balances, a mortgage and other forms of debt that they are trying to pay off. In many cases, taking advantage of a debt consolidation loan means that you can lower your monthly payment and pay off your debts faster, which in turn will save you money in the long run and will protect your credit record as well. Taking advantage of a debt consolidation loan turns all of your debts into one monthly payment and is an incredibly convenient way to get out of debt fast.
Considering a Debt Consolidation Loan?
If you are considering a debt consolidation loan, the first step is to add up all of your debts, including all credit cards and loans, and take a look at the interest rates on your cards. You may not realize that you are in a bad situation until you sit down and really take an honest look at the state of your finances. With many credit cards offering interest rates at anywhere from 12% and even up to 30% for those who have missed a payment or defaulted on a balance, you can save hundreds or even thousands of dollars if you consolidate each of the balances into one debt consolidation loan. This makes it so much easier to pay off your debt without having to manage multiple accounts, and since you are only paying one creditor, you don’t have to worry about missing a payment or paying late – you have one payment due each month and only one due date to remember.
How to Get a Debt Consolidation Loan
Applying for a debt consolidation loan involves filling out a loan application and supplying any additional information that the lender requires, including any applicable credit card and loan statements. Once you have been approved for a debt consolidation loan, the monthly payment and interest rate will be determined, and your debts will be transferred to the new lender. Keep in mind that the debt consolidation loan process typically takes several days before your previous debts are paid off or “consolidated” into the new loan, so it’s a good idea to keep paying your creditors until you know for sure that the balances have been transferred. This way you can avoid any further damage to your credit record due to missed or late payments.
As with credit cards and loans from the bank, the terms of a debt consolidation loan can change if you miss a payment or make a late payment. To avoid even bigger problems down the road, be sure to read all loan documents closely before signing, and don’t take on a bigger loan than you can reasonably handle. Debt consolidation loans can be a lifesaver for those who follow the rules and pay them off according to the terms of the lender, so be sure that you understand all of the details carefully before committing to a loan.