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Posts Tagged ‘Debt Consolidation Loans’

A Debt consolidation loan is a loan used to repay several other loans or other debts. A Debt Consolidation Loan is a low cost loan secured on collateral in the form of any securable property, your home, your vehicle or any valuable asset. Debt consolidation loans consolidate all debts incurred through personal loans, credit cards, overdrafts, or any number of unpaid bills that have built up over time. These loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest. A debt consolidation loan can reduce both your interest costs and your monthly repayments, putting you back in control of your life.

Debt consolidation solutions are practical means for eliminating credit card and other high interest debts, and getting your financial health and future back on track. Being concerned about debt 24 x 7 is extremely stressful, both on you and your family. So take a few minutes right now and educate yourself about your options.

1.Go with a Debt Consolidation company that has a good reputation.
Don’t assume that every non-profit company is necessarily going to look out for your interests more than for a profit. Shopping around will give you the means to decide on the one that best suits your circumstances and your budget. Spend time researching different lenders and get quotes from a handful before deciding on one.

2.Do the math yourself.
Take the time to work through the expenses yourself and see how much you will be paying, how long it will take to pay off the loan, etc. Look for hidden costs, creditor charges, etc. Many lenders add payment protection insurance to their loans without the borrowers’ knowledge, which is often more expensive than those available elsewhere. People keen to consolidate their debts, take the first opportunity available, unaware of lower rates and other available options.

3.Is it cost effective in the long run?
Paying off an existing debt may incur charges for early settlement and there may also be a fee for arranging your consolidation loan. A debt consolidation loan should be cheaper than the individual loans and debts since that’s its purpose. Otherwise how is it different from any other secured loan? Also, by taking a new debt consolidation loan, you will be extending the period in which you are paying off debts - and that might mean a greater interest cost in the long run. So read the fine print on your credit agreement statement before signing it.

5.Interest rates:
Make sure you understand the difference between variable and fixed rate loans. If you sign up for a variable rate loan, you may get a lower rate initially, but within a few years it may go up. On the contrary, a fixed rate option does not fluctuate with any changes in rates. However, you do not gain when the interest drops either.

6.Debt Consolidation counselling:
Debt consolidation with debt counselling can provide you with expert debt advice for financial planning. This would help you sort out your present debts as well as prevent you from getting into future debt. Debt counselling services can talk to your creditors about reducing your interest rate, eliminating late fees, altering repayment options and extending your loan term. Look up an agency that is the member of the National Foundation for Credit Counselling (NFCC) or the Association of Independent Consumer Credit Counselling Agencies (AICCCA).

Secured on your collateral low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, loans and replace them with one, low cost, monthly payment – one calculated to be well within your means. Never take a loan that is over the top, take something that suits your needs.

It has been found that a significant number of residents are not aware of the benefits of the debt consolidation options and are suspicious about how it works. There is a need to increase the awareness of the debt consolidation solutions and evolve new varieties and features for debt consolidation loans. There is a great potential to increase the benefits of debt consolidation loans.

Unless it is a planned unemployment, in most cases it is difficult to predict how long the unemployment period will be stretched. Most people, who are overconfident of their ability to regain employment within a short time span, spend the savings of their life-time. When the savings also give way through an extended unemployment, debts become the primary source of funds. This is when borrowers become indebted to a large number of creditors. On the line of loans for the unemployed, loan providers have come up with debt consolidation loans for unemployed. The aim of the debt consolidation loan for unemployed is to bring the menace of debts to an end. Though a temporary end to debts, the unemployed people will heave a sigh of relief once the debts vanish.

Debt consolidation loan for unemployed settles multiple debts taken at multiple rates of interest through a single loan. Borrowers get to save abundantly on the rate of interest. While the borrower might have accrued debts at higher rates of interest, debt consolidation loans for unemployed carry a minimal rate. The rate of interest, commonly referred to as the APR, is charged according to the recent figures. The debts held however may have been adding interest according to older interest rates.

Most people are conversant with the way in which a debt consolidation agency proceeds on a debt settlement request. We will describe the process in brief for the individuals who are new to the process. When the debt consolidation agency receives an application for debt settlement, it sends a representative to study the exact requirements of applicant. The applicant is asked to total all debts incurred till date and categorise them on the basis of important categories. Like credit card debts will have a different category. So will debts which demand immediate repayment. When the individual is ready with the debts data, the debt consolidation agency issues a loan according to the size of debts, or as borrower desires. The borrower is also helped in the debt settlement process through debt management help.

This is how debt consolidation agencies settle the debts. The unemployed people consider the debt consolidation loans for unemployed with veneration. Had it not been for these loans, borrowers would have surely become bankrupt.

Debt consolidation loans for unemployed are lent primarily against ones home. Lending against home covers the loan provider against most of the risk associated with lending to the unemployed. It is also beneficial to the borrowers in the sense that any accumulated equity in home is utilised. The use of home helps the unemployed borrower get very good deals in debt consolidation loan. Compare the state of an unemployed borrower who wants to draw a debt consolidation loan at the same terms and the importance of home will be demonstrated. Very few loan providers are ready to complete the request of such unemployed people. The lenders which lend to such borrowers charge a hefty interest and have very strict terms.

Assets like home and property are for these very times. The offering of home as collateral does not imply sale of the house. It is only that the loan provider takes the property papers into his custody. As soon as the debt consolidation loan for unemployed is paid, the property is also free.

Home equity loan is the name given to such loans. Because it is the equity in home that gets consumed in the process, the name is very apt.

Borrowers can decide to use the entire equity in home at a time, or keep it for any future contingencies. Home equity line of credit or HELOC provides for the future contingencies as well. Under this method, borrowers decide an arrangement through which they will require money. Therefore, if 10% of the home equity loan is used as a debt consolidation loan for unemployed, it will be decided to use the remaining 90% as a credit line. Credit line is an arrangement where borrower draws only when a financial need arises. The remaining sum remains deposited in his loan account and no interest is charged on this.

Till the time you again become employed, you cannot have used a better technique to fight debts other than debt consolidation loans for unemployed. Online lenders have made it easier for the unemployed to check their offerings. Just go to a public internet café or if you have internet in your office or home, browse through the websites offering debt consolidation loans for unemployed, and you will have a multitude of deals to choose from.

If you’ve got a number of credit cards and insurmountable credit card debt, then perhaps it’s time to consider a debt consolidation loan. A consolidation loan is a loan that you can use to pay off all your debts, meaning that you can pay them off for less money without having to worry about lots of different bills.

For instance, if you had borrowed £3000 five years ago, you may now owe £5000 (principle plus interest). A debt consolidation program may involve eliminating some amount of interest so that you pay less than £5000.

Also, your previous outstanding balances may be on five different credit cards.  You need to pay 5 bills every month. Once you participate in a debt consolidation program, all your accounts will be consolidated into one account. You now pay only one bill each month.

In a credit card debt consolidation, your average interest rate may be reduced.  All your loans can also be transferred to one single card that has a lower interest rate than the ones you are currently paying.

Here are top three factors to consider for Credit card debt consolidation:

1. Interest Rate

Get the best interest rate you can if you opt for debt consolidation. This interest rate is almost as important as the one on your mortgage, but much harder to change after you’ve signed on the dotted line. Don’t be fooled by any offers that give you a good rate for a limited time – you’re going to have this loan for quite a while.
Interest rates for credit card debt consolidation loans through traditional lenders may be  based on your credit score. If high, you are likely to get a credit card debt consolidation loan at a lower interest rate. If the credit score is low, credit card debt help companies may be able to help offer methods for raising your credit score.

2. The loan tenor or length of the loan

The most overlooked aspect about debt consolidation loans is that the ones with lower payments generally last a very long time – you may end up paying it off for twenty years, or even longer. You should try to find a loan that doesn’t last as long, and asks for payments that are as much as you can afford.

3. A payment sum that you can manage.

Almost without exception, the loan will be secured on your home. That means that if you start missing payments, the finance company will kick you out, take (‘repossess’) your house, sell it, and pay back the debt with that money.

Debt is a fact of life in America, making debt relief a national obsession. A search for “debt relief” on Google pulls up over 34 million pages; on Yahoo and MSN, the total is over 12 million pages.

The average American household has £9,300 of credit card debt, but the share of income going to lower credit card debt has fallen to 0.3 percent.

The increase in personal debt can’t all be blamed on overspending. After adjusting for inflation, wages have been flat for the past five years while the cost of essential goods and services like housing, food, medical care and transportation have risen over 11 percent according to the Federal Reserve Board’s most recent Survey of Consumer Finances.

Housing Debt
Based on this study, the Washington Post recently reported that,

The debt of the typical American family earning about £45,000 a year rose 33.1 percent from 2001 to 2004, after adjusting for inflation … Housing debt has climbed notably because home prices have risen and people have borrowed against the equity in their homes. From 1989 to 2004, for example, the median mortgage debt more than doubled, from £46,900 to £96,000.

This refinancing trend is one of the main strategies for debt relief. It takes several forms: first mortgage refinancing, second mortgages, debt consolidation loans and home equity lines of credit. These mortgages can be either fixed-interest or adjustable-interest loans.

Many websites keep abreast of current interest rates and offer a free mortgage refinancing application that matches potential borrowers with the best loans based on factors like credit history, FICO score, type of mortgage and size of loan. www.LowOwe.com is typical of sites that help clients reduce the monthly cost of home ownership through refinancing.

Debt Consolidation Loan
A debt consolidation loan converts a passive asset—home equity—into ready cash for debt relief. It is easier to get than other forms of borrowing because the loan is secured by tangible property. It makes better sense than borrowing against the cash value of a life insurance policy or pulling money out of a retirement or 401(k) account.

New or refinanced mortgages don’t really reduce debt, but they can restructure it in beneficial ways. Benefits include: being able to pay off high-interest credit cards and other forms of revolving debt; making home improvements that increase the market value of the house; having a single monthly payment at a lower rate of interest. An added plus is that the interest on a home loan or mortgage is usually tax deductible.

But don’t wait too long to refinance. CNNMoney.com reports that, “Real estate gains came to an abrupt halt in the first quarter of 2006, with the median price of a U.S. home falling 3.3 percent from the fourth quarter of 2005. … Prices were basically flat or lower during the quarter as inventories of houses for sale rose and their time spent on the market lengthened, according to a survey of 149 markets by the National Association of Realtors.”

Even if the Feds keep raising interest rates, mortgage refinancing and home equity loans will still be the preferred form of debt relief for homeowners who find themselves in a financial pinch. At a time when the national savings rate is below zero, home equity is the only asset many people have.

Does credit cart consolidation really provide a reduction in your debt owed? Many people want to know the answer to this. The answer is simple: yes, you can receive your debt consolidation at a lower interest rate, but you will be required to put up collateral to receive it.

A debt consolidation loan generally relieves you of a huge amount of pressure to pay off your debt, since it combines all your payments into one.

Unfortunately, in this day and age numerous people find themselves having to pay off multiple creditors. By combining all your debts into a single payment, it makes the process of keeping track of and paying off your debts easier than ever.

Debt consolidation is done through different ways; first, by taking out debt consolidation loans, debt consolidation mortgage, debt consolidation re-mortgage, and also through debt counseling.

A debt consolidation loan is received by a couple different methods: unsecured and secured debt consolidation loan. A secured loan simply mean you need to provide collateral if you are in breach of payment.

An unsecured loan means you don’t have to give up collateral. Here’s an important fact: you generally need a good credit history in order to obtain an unsecured loan. Keep this in mind when applying.

No mater how much debt you are in, don’t lose hope. Some of the greatest entrepreneurs in the world today were at one point over $100,000 in debt before they got out and eventually created the lifestyle they’d always wanted. In fact, being in debt could be the greatest thing that ever happened to you-if you use it to learn from it and move on.

If, however, you simply resign yourself to a lifetime of paying off your bills, and never learn from your mistakes, you will stay stuck the rest of your life. The choice is yours. This could, in a weird way, be the greatest thing that ever happened to you.

Will you use it as a benefit, or a hindrance? Therefore, the most important thing is to obtain a debt reduction credit card consolidation loan, and then move forward in learning to achieve financial freedom.

For many, the main purpose of a debt consolidation loan is to become debt free as quickly as possible.  Debt consolidation allows people to save a few dollars each month while still simultaneously reducing the debt load with each payment.  The result is they save money on interest and effort by making only a single payment instead of multitudes each month.

A loan to consolidate debt can backfire by pulling one down into a larger burden of debt instead of completely alleviating it.  For example, the loans are almost always advertised as having low interest rates and attractive package perks which stimulates the instant gratification seekers to sign up instantly.  So, what happens when someone really doesn’t read the fine print and doesn’t shop beyond the sparkly television commercials?  Well, simply put, those people often end up with not very competitive interest rates and worse customer service than they would had they shopped around for the best buy.

Debt Consolidation Loans, while they offer a great premise — multiple bills put into one consolidation loan with one monthly payment at a better interest rate — do have a few negatives as well.  One is that people abuse them so instead of paying off their loans, they take out a perpetual consolidation loan which ends up costing more in long-term interest.

Another big downside to debt consolidation loans comes in the form of creating the appearance of everything is under control so the consumer returns to old bad habits of spending too much and accruing debts.  Just because there is more disposable income coming back into the home doesn’t mean it should be instantly spent on more consumer debt, yet often times that is exactly what happens.  Then, eventually, a new debt management tool is needed to clear up the new charges and the lingering original consolidation loan balance.  It becomes a real catch-22.

So, when considering a debt consolidation loan, take care to shop around for the best possible loan program and consider credit counseling to help you become more aware of how personal spending habits can affect the ultimate success of the loan as a spending solution.

Debt consolidation loans can be a convenient way to reduce a number of bills and turn them into one monthly bill. Debt consolidation can reduce interest rates, secure a fixed interest rate for one loan and may even shorten the length of many loans. Debt consolidation loans can help the borrower do this and turn their numerous bills into one. Before entering into an agreement with any company though an individual must know what they are getting themselves into.

Debt consolidation companies will speak to the lenders on behalf of the individual. They will work with the creditors to reduce interest rates and sometimes even get the lifetime of the loan shortened. Creditors are usually happy to deal with these debt consolidation companies as they are trying to get the money back to pay off the debt and will be glad to cooperate with any process that makes this happen.

Debt consolidation companies will also work with the individual to prepare a monthly budget that will allow the person to look at their financial situation and decide where spending could be cut to repay the debt consolidation loan.

Debt consolidation companies are in business to make a profit. Knowing this, an individual needs to be aware of what they are getting into when they enter into an agreement with a debt consolidation company. It is necessary to investigate different companies and ask many questions to determine if that company is the right choice.

Referrals and word of mouth is perhaps the most important thing to look at before signing on with any debt consolidation company. Ask the company if you can contact past customers of theirs to ask about the service they received and if they were happy with it. Also contact the local Better Business Bureau to make sure that there are no complaints filed against them.

It’s important for consumers to shop around and compare the quotes as well as the services of many different companies. The amount of the loan, the term of the loan, and the interest on the loan should all be calculated separately. This could help when going back to other companies and try to negotiate things such as the interest rate. The individual should also compare which company they feel most comfortable with. These companies will be working with the person for some time so it’s important to like the services they offer and feel at ease with them.

The last thing that needs to be considered when entering into any agreement with a debt consolidation company is how many lenders and creditors they work with. A good company will be willing to work with as many lenders as possible to reduce the debt and put the borrower on the path to financial freedom. It’s important to be wary of debt consolidation companies that will only work with one or two creditors. This could indicate that the company is more interested in working with the lender than they are with the borrower.

Need to consolidate debt? Chances are, you’re doing what you can to pay it off, as quickly as possible.  You want to be debt-free.

• A worthy goal, to be sure.
• But what do you do in the meantime?

Having a debt management plan is just as important as having a debt reduction plan.  It can save you hundreds or thousands of dollars in interest, and maybe even reduce the total amount of time it takes for you to be come debt-free.

Here’s how to do it right, without going to pricey or questionable debt consolidation firms.  And forget about those debt consolidation loans!  You have most of the tools you need to do it yourself.

First, promise yourself you won’t take on any more debt.  Put all your credit cards somewhere besides your wallet.  One of my favorite spots is the freezer; by the time you thaw the cards to use them, you’ve probably changed your mind about your purchase.  Why so drastic?  Because you can’t manage your debt if you keep adding to it.

Now, you need to make a list of all the debts you have.  Creating a chart or spreadsheet is probably the easiest way to sort all the vital information.

List the following:

1. Creditor’s name
2. Principal currently owed
3. Minimum payment
4. Interest rate
5. Contact phone number
6. Website address with login information

Next, add any credit lines you may have open but with zero balances to the above list.  (I’ll explain why later.)  Fill in all the above information, except principal and minimum payment, of course.

Take your list and start calling each of your current credit card companies. Ask what their current offers are for balance transfers.  Mention that you’d be willing to move your balance to another bank’s card if a better offer comes along.

Take notes on your chart or spreadsheet for each offer.  Watch the fine print:  ask if there are balance transfer fees, how long the lower rate period lasts, what happens to the transferred balance if you make a late payment, etc.

Be aware that a common gimmick now is to offer a very low rate for transferred balances with no fees, as long as you charge a certain amount each billing period, say £25, which is billed at a higher interest rate than your transferred balance.  Since the credit card companies apply your payment to the lowest-rate balance first, you’ll accrue the higher interest rate on the monthly charges until your transferred balance is paid off.

For example, say you transfer £5000 at 1.9%.  The rate goes up in 6 months unless you charge at least £25 a month by the close of the billing period.  Purchases are charged at 11.9%.  If you pay £200 a month on the card, it’ll take you 25 months to pay off the transferred balance (ignoring finance charges).  Meanwhile, for 25 months you’re charging £25, which grows to a balance of £625 plus interest of 11.9%.

This gimmick won’t hurt you if you can get a low interest rate for purchases (say, less than 9.9%) and you make sure you only charge the amount needed to maintain the low transfer rate.  When the transferred balance is paid off, have the cash on hand to pay off the purchases, too.

Okay, back to debt management.

After you’re done calling all your credit card companies, choose the one with the best offer.  Transfer as many of your balances as you can to that card.  If there’s not enough room, ask for a credit limit increase, or transfer the rest to the card with the second-best offer.

Note:  if you ask the best-offer card to increase your credit limit, it’ll show on your credit report, so unless your credit is sterling, be careful.

Figure out when any introductory rates expire and make a note on your calendar.  If you won’t have your balances paid off by then, back up about six weeks and make a note to search out a new lower rate.

When you’re done, you should have all your credit card balances on just one or two cards.  Maybe three.

At this point, most experts would recommend you close your other accounts.  I disagree, unless it would improve your credit, and you need to make a large purchase soon, such as a mortgage.  Put those cards in the freezer instead.

Why not close them?  Because if you need to transfer balances again, those credit card companies will be hungry to get your business back.  If you’ve faithfully paid your transferred balances on time, your credit will be in good shape (or at least better than it was) and they’ll fall all over themselves to get you to transfer balances back to them.

Another note here:  if you can’t control your credit card spending, then by all means close the accounts.  No debt management strategy is worthwhile if it means you’ll only put yourself deeper in debt!

Some folks often ask me if it makes sense to put their credit card debt on a home equity loan or line of credit, as they often have low introductory interest rates.  I hesitate to recommend this.  Home equity is secured by your primary residence.  If you can’t pay, the banks foreclose.  Why take the chance if there’s another way?

Get your debt to the lowest rate possible, keep track of when low rates expire, and pay as much as you can as fast as you can.

Don’t pay others to do it for you.  Do your own debt consolidation, and then make a plan to pay it off as quickly as possible.

I know you can do it!