Debt Consolidation Loans
Debt consolidation loans are granted for the purpose of paying off all other loans and credit cards. Thus combining them into a single monthly payment. It is a popular type of loan with those who have a number of different credit accounts who are looking to reduce the amount of money that they spend on debt repayments each month. Read More >>
What Are The Advantages Of A Debt Consolidation Loan?
If you have credit cards and you are only making the minimum payment. It may take you a long time to pay the card off completely. This is because the minimum payment will probably only just cover the interest. You will not be making much of a dent in the actual balance. If you consolidate your credit cards into one loan then you will have a definite time frame for paying this loan back.
Another advantage of a debt consolidation loan is that you can save a lot of money in interest. You will know what the interest on the debt consolidation loan is going to be. From the moment that you take the loan out. It is likely to be less than you would pay on a credit card for two reasons. Firstly, the APR of a personal loan will be a lot lower than that of a credit card which means less interest to pay. Secondly, the repayment period will be a lot shorter and this will also reduce the interest.
If you have a few credit cards and loans outstanding. The minimum payment for all these accounts may add up to to a substantial amount of money each month. When you take out a debt consolidation loan. You will only have the one payment to make and this should be much lower.
What Things Should You Be Aware Of?
Once you have paid off your credit cards and other borrowing it might be an idea to close the accounts down. This will remove the temptation to keep spending and end up in the same position as you were before.
Another thing to be aware of is that the money that you borrow may be paid directly to the companies that you currently owe money to. Rather than being paid directly to you. If there is any difference in the amount that is needed to pay these debts and the amount that you have borrowed, then this will be sent to you.
How To Apply For A Debt Consolidation Loan
When you are applying for a debt consolidation loan the lender will want to know the details of the debts that you currently have. And how much these are in total. This will give them an insight into how much you need to borrow.
They will also require details of your income and expenditure. You should include all your current repayments in this budget. Even though you won’t have to worry about these if the loan is granted. This will show the lender that the loan is affordable. Thus far less than now and will make them more confident about lending to you.
You may find it harder to be accepted for a debt consolidation loan if you have missed any repayments on your current borrowing. Therefore if you feel like you may soon be in difficulty with your repayments then it may be better to apply for the debt consolidation loan sooner rather than later. The lender will almost certainly check your credit report as part of the application process. So it wouldn’t hurt if you were to make your own checks before you applied. This gives you the chance to check that everything is as it should be. This also provides the opportunity to rectify any mistakes.