It can happen to anyone, especially in today’s economy. You are floating along, doing okay, and then suddenly an illness, accident, or other unexpected expense comes along and you have trouble managing your bills. The longer you continue to struggle, the further behind you can become until you find it almost impossible to catch up. If this has happened to you, there are several options out there which can help give you the boost you need to get back on your feet. Once such option is a debt consolidation loan.
What is a Debt Consolidation Loan?
If we put it in the simplest terms, it is taking out one big loan to cover all of the smaller loans which you may have. Many times people will choose this option because they can receive a much lower interest rate on the new loan that they had on the older, smaller loans, making their payments much smaller. It also simplifies everything into one payment to one creditor, instead of many payments to several creditors.
When should you consider one?
If you have had some event or income loss adversely effect you, and you cannot manage to pay your bills on time, then perhaps you should consider a debt consolidation loan. Often, one can catch up all of their bills and have a bit left over to save in case things should go south again. Since it usually helps you to pay less each month, it can also be beneficial for those who can pay their bills now, but have none left to save at the end of the month. Debt consolidation can make it possible to pay all of those bills, and still have money to save. It is also a good idea to consider a debt consolidation loan if you simply want to combine all of those small bills into one monthly payment. Dealing with one creditor for a smaller amount of cash is definitely better than having to deal with several and paying more.
What are Some Advantages of a Debt Consolidation Loan?
As already mentioned, a debt consolidation loan can make it possible for you to pay off all of those smaller bills and have only one loan payment per month. This payment will usually be much less than the total sum of all of the smaller bills, because of various factors such as lower interest rates, long term loans,Ā and a more flexible payment schedule. Your stress level can be greatly reduced when you no longer have several creditors to deal with, and you can make your payments to just one. Those aggravating collection calls will be a thing of the past, and budgeting money will be much simpler when all of your bills are paid to just one place. Your credit score could also be saved if you use a debt consolidation loan to pay off creditors who would have otherwise reported you to a credit agency.
What if I Have Bad Credit?
If you are considering a debt consolidation loan, there are a few things you should know. First of all, you will need a copy of your credit report. This is because a good to excellent credit score is needed to acquire a low rate debt consolidation loan. You can also use the report to spot any issues you may have with your credit and try to fix them. It is difficult to get a bad credit debt consolidation loan. If you have a bad credit score you will be forced to pay a high interest rate for your credit consolidation loan if you are even able to qualify. Most reputable lenders will deny your loan application if you have bad credit. So even though you may want to consolidate your debt with a low rate debt consolidation loan, if you have bad credit, either you won’t qualify or the interest rate will be too high to make it worthwhile.
You will also need to add up the total of all of the money that you owe to various creditors. This will help determine the amount of the debt consolidation loan that you would need. Make sure that the bills which you are going to pay off with the loan actually have a higher interest rate than the loan itself. Otherwise, it is best to manage those bills separately. Finally, sit down and figure up your monthly budget. Be truthful to yourself about what you can afford to pay each month, and look for a loan which will feature payments of that amount. Taking out a debt consolidation loan will not help you if you cannot make the payments, so do not aim too high.
A Better Alternative To A Debt Consolidation Loan!
There is a saying that you cannot borrow your way out of debt. By using a debt consolidation loan, you are basically borrowing from Peter to pay Paul. National Debt Relief offers help with your debts that does not involve a loan. You can also lower your monthly credit card payments and get out of debt in a shorter time than a consolidation loan. You can give us a call toll free with no obligation and discuss your options.