Debt consolidation is a process where the borrower merges all his debts into one and deal with his emerging financial crisis effectively. Since several loans are merged together, the term “consolidation” is used when describing such a loan. Based on the current economic conditions and credit facilities in the market, you can get an affordable interest rate on your consolidated loan. If you consolidate loans, you will be in a better position to clear all the existing small loans. There are debt repayments programs that will help you manage and repay the loan effectively.
Reasons to Consolidate Debt
It helps you to simplify your finances. Instead of dealing with several small high interest loans, you will deal with a large loan but with a lower interest. Therefore, you can repay the loan on time.
- It saves you money by reducing the overall cost of the loan.
- You make a smaller monthly payment. This is true if you choose to consolidate your loans with a lender who gives you a lower interest rate and an extended loan repayment period.
- You can repay your debt faster. With debt consolidation, you can make sound financial judgment and clear all your debts with ease.
A popular way that you can get out of debt quickly is by consolidating your loans. There are many types of debt consolidation and debt management plans. We will delve into these and explain them to you for a better understanding.
Debt consolidation that works
When you have debt consolidation loan, you will use the proceeds of the loan to pay off all existing debts. Consolidating all your loans into one means that you will get these three main benefits
- Reduced interest rate- lowering the interest rate will allow the borrower to take off longer years of repayment ultimately saving you money. All you need to do is to make sure that the annual percentage rate of the new loan is lower than the loan you are repaying.
- Easy to repay your loan, with a consolidation loan you have to monitor only one payment. This is easier to manage unlike following up with several loans. However, financial experts recommend that you look at annual percentage rate.
- Improved credit score: many people looking to consolidate loans have maxed out their credit cards and this increases your utilization ration. A high utilization ratio means that you have a lower credit score. By paying off your debts on your cards, you reduce your utilization and therefore improve your credit score.
Debt Consolidation Program to Use
Personal loans such as debt consolidation loan will help you overcome debts by merging all your loans into one. Consolidating your debts gives you a chance to recover from poor credit because you will be able to repay the loan on time. You can choose to look for a lender who will help you in managing your debts through debt consolidation. If you are struggling with your bills and several other small loans then debt consolidation is the right option for you. Your lender will repay all your debts and you will remain with one loan to pay off. Your lender will negotiate with your creditors and you will get a better interest rate.
How Does It Work?
When you want to request for a debt consolidation loan, your lender will guide you on how to repay the loan with ease. The interest rate of a debt consolidation loan is determined by the recurrent income and the credit score of the borrower. However, even with a less than stellar credit history, we will connect you to lenders in our network who will finance your loan.
- In conventional lending system like banks and other financial institutions, you are required to provide collateral in case the borrower defaults the loan.
- Lenders in our network do not require collateral to give you the loan and this make it a better choice for people with poor credit history. However, you need to meet all the criteria set forth by the lender in order to qualify for the loan.
Is Debt Consolidation A Good Choice?
The answer to the question depends on your situation. With one monthly payment, it is easier to focus on repaying it. The interest rate is usually lower than the conventional loans.
- Many people make the mistake of getting into debt consolidation plan without fully understanding it. You should fully understand what consolidation is all about before committing to it.
- You should not use the loan as a solution to long-term financial issues.
- Consolidating debt through conventional lending systems will affect your credit score negatively because the loan interests are quite high.
- The main reason why people choose to consolidate debt is to get out of the many debts they are currently having. All your small loans will be marked as settled, therefore you will pay less than what you owed and it will have a positive effect on your credit report.
- You will save some money on the lower interest rate.
- There is a possibility that your credit score will improve considerably if you use a consolidation loan to clear all your existing loans. Lowering the credit utilization ratio correlates to a better credit score.
Once you understand how consolidation works, you can choose the best lender in our network who will finance your consolidation loan. We recommend responsible lending and you should not use debt consolidation as a solution to your long-term financial problems.
Our customer support team is available to help you during the loan request process. Ask as many questions as you can and also check out the FAQ page to learn more about the loans and what to do during the request and repayment process. We are here to help you get access to credit facilities that you would otherwise not have access to in a conventional system.