When you opt for using a debt consolidation solution, you take all debts you have with various lenders and consolidate them into one loan (or new debt). For those stuck in a cycle of higher interest payments or who are not yet behind in payments but are facing the possibility of becoming so, this solution is best. The ugly cycle of interest growth, where higher and higher portions of your income are used to pay off interest as your debt continues to grow, incurring more interest, is stopped with a consolidation loan.
Getting a consolidation loan could help you take advantage of payoff agreements with your current creditors. This means you could cut some fees, lower some of your owed balance, and thus lower your overall debt. Your new loan will be a fixed tenure, flexible, or revolving credit plan at a more reasonable interest rate. Other options that are not as savory include renegotiating your debts, getting a credit counselor, or transferring funds from one credit card to another in an effort to lower interest. Sometimes, money can be borrowed against retirement funds or by refinancing or taking a second mortgage on your home.
Debt consolidation can be much more beneficial and easier to do, but it requires that you find a reputable and reliable debt consolidation company with the financial backing to guarantee your loan. The loan itself will usually pay off all your creditors automatically and you’ll be given a single monthly payment to just your consolidation lender.
There are many advantages to debt consolidation:
*A single interest rate rather than multiple interest rates to multiple lenders. *High interest rates and late fees are eliminated. *Reducing and eliminating your debt happens much sooner.
Likewise, debt consolidation has drawbacks too:
*Your credit is put on hold, which means you can open no new lines of credit. *Your credit rating may be negatively effected for a few years.
If balance transfer options do not help in relieving you from debt burden, a debt consolidation loan is the best option. Obviously, a debt consolidation loan is still contingent on your ability to pay and your credit. So if you’ve already fallen down the slippery slope of spiraling debt, late payments on your chase visa cards, and other bad credit mishaps, you may not qualify for a consolidation loan.
The sooner you get in to talk to someone about getting a debt consolidation loan, the more likely you are to be able to secure one and start living debt free again. So if you’re looking at mounting debt with a credit cliff coming that you can’t help but fall from, find out about getting a debt consolidation loan as quickly as you can and stop your credit nightmare before you fall over the edge.