Personal Debt Consolidation Loan: Consolidate Your Loans Into One
The Concept of personal Debt Consolidation Loan is ‘to take one loan to pay off several loans running simultaneously’. In this case, the amount of one loan is normally sufficient to clear off all the other simultaneously running loans.
Personal Debt Consolidation Loan: The Use
In case of having several loans running simultaneously, the different loans may have different monthly payment dates, which keeps the borrower under pressure throughout the month. But in case of a debt consolidation loan, it becomes quite easy to pay one installment once a month. Next, the several individual loans become costly in terms of interest charged whereas a personal loan for debt consolidation comes at a lower interest rate. So, the borrower saves due to lower interest rate.
So, in simple terms, a debt consolidation loan simply transforms a number of unsecured loans, like credit cards, into another unsecured loan. However, most commonly, a personal debt consolidation loan is lent as a secured loan, where in an asset is provided as collateral, normally a home. In this case the home is mortgaged. Due to this collateral, personal debt consolidation loans have cheaper interest rates, due to reduced risk for lender. Then the total interest and the total cash payments towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. It has been seen that borrowers of personal debt consolidation loans are under credit card debts, who spend more than their earning. If this habit continues, even a personal debt consolidation loan cannot help after a certain extent.
A personal debt consolidation should be availed if someone is paying, for example, credit card debt. Credit card debt carries a much higher interest rate than even an unsecured loan from a bank. Consumers in debt who own property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash payments towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. Therefore, to summarize the above, a personal debt consolidation loan offers the following advantages:
• Reduce Monthly payments:
• Improve Credit Record
• Reduce the interest you pay
• One payment instead of several monthly payments
Personal Debt Consolidation Loan: Do You Qualify
A lender checks the profile of prospective borrower of debt consolidation loan before paying him the loan amount. While checking the profile, lender looks at various factors such as the current amount of outstanding loans, credit history, source of income etc. if the borrower has very bad credit history, lenders consider only secured personal debt consolidation loans only to reduce their risk of lending money to a person who has a record of defaults in payments. In most of the case, borrowers use their home as collateral.
Therefore, the key factors in evaluating a prospective borrower of personal debt consolidation loans are:
• Amount required
• Credit History
• Payment duration
• Any collateral
• Source of Income etc.
There are lenders who accept even unsecured personal loans but in this case the loan amount remains quite low due to increased risk for lenders.
To conclude, a personal debt consolidation loan is a type of loan which is borrowed to pay off several other loans. In this case, usually, interest rate is low, which reduces the cost of debt consolidation loans compared to sum of several simultaneously running loans.
Jennifer Morva
http://www.articlesbase.com/loans-articles/personal-debt-consolidation-loan-consolidate-your-loans-into-one-745584.html
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Need help and ideas for what to do with credit card debt.?
Need help and ideas for what to do with credit card debt.
I’ve posted before, but for some reason the post was removed from the site.
I have about $20,000 in credit card debt. When I called a bank to talk about consolidating credit cards into one personal loan, they said it would depend on my credit score.
So I have a high amount of debt and a ok credit score, transunion reported showed 590, but another report from experian showed 670, so I don’t know what is right.
so if I am right about this, the bank will not give me a loan because of a “OK” credit score, but the credit cards are slowly going down and I am paying a high interest rate.
How can I get out of this catch-22 situation ? without ruining my credit-score. I also found out that doing one of those ‘debt consolidation’ programs can negatively affect your credit score and make banks look the other way down the road because they can see you did that.
Thanks for any ideas.
670 might be an OK score, but 590 sure isn’t. Banks have gotten more careful of who they lend money to, and to be honest with you, you don’t look like a very good risk to them right now.
Unfortunately, credit card companies get you big-time on interest, especially when your balances are somewhat out of hand. Since the balances are going down slowly, you’re doing the right thing – keep up the good work, even though it will cost you a lot of interest by the time you get them paid off. Pretty much anything else you’d do would hurt your credit score.
Good luck.
References :
1. STOP spending!
2. Those debt consolidation places STEAL your money & ruin your credit
3. Stop worrying about ruining your credit…you are caring tons of consumer debt anyway so who cares
4. Skip ALL the others & start to pay the smallest debt first. (pay minimums on others if possible…but if the other minimums take up too much cash flow just skip them & let them pile up)
5. After the smallest is paid move on to the next smallest one
I know you are thinking this will ruin your credit…and it will (a little) but none of that will matter 3 years after you are done with all your debts.
* You will be debt free
* After 3 years your credit will sky rocket through the roof because you will not be carrying any consumer debt (& oh, man they gonna want you back sooo bad).
* And after 3 years of not being able to obtain new credit cards will be a GREAT lesson for you. That it IS possible to live on cash alone.
References :
It will probably be impossible for you to obtain a debt consolidation loan. Banks are being very strict these days. Your 590 score is considered poor and your 670 is only fair. Therefore, there’s really no incentive for a bank to assume the risk.
Your best bet is to continue making all your payments on time. You should also eliminate any wateful spending. Most importantly, stop buying things on credit. It’s a good idea to keep one card in your wallet in the event of an emergency. Other than that, leave the plastic at home.
References :
Consolidating debt isn’t going to boost your credit score. Your score is based on several factors which include history for one. With that in mind, you don’t want to start to cancel credit cards (history). You have your score based on credit use to credit limits and debt to income ratio. Moving the balance from several cards to one card or loan isn’t going to change those ratios. You owe what you owe. The few percentage points of interest in savings really isn’t going to affect your financial life all that much unless you are planning to stay in debt for life by paying minimum payments. If that’s your intention, again, a consolidation isn’t going to work for you. You could consider a voluntary debt management program which can help reduce your interest and you’ll have one payment each month, often with lower interest rates but you will have to cancel cards. That may or may not be wise for you. If you can’t work your own plan then a management plan like with Consumer Credit Counseling may let you breathe easier but you still owe what you owe. The worst thing is to consider a debt settlement which tells creditors you are a deadbeat and they are lucky to get offers to settle with you for less than you owe. Your credit will plummet lower than it already is. Hmmm… what’s the best option? First of all to look at your spending habits. It will do you no good to consolidate debts to one loan and go out to rack up another $20K in debt on the now freed up cards. You’ll soon be in $40,000 of debt. You need a plan. You are going to want to tackle your bills with more than minimum payments. Find ways to decrease your expenses and/or increase your income. Those who fail to plan are planning to fail. List all of your debts. Take the minimum balances you are paying and divide the minimum payments. You’ll get a ratio of which bills to pay off in what order. Continue paying minimums but add on more than minimum payments to the card (or loan) with the lowest number after you divide. Tackle the lowest ratio number with intensity and then put the same amount onto the next lowest score. As you see progress in getting rid of your cards (usually the smallest balances) you will be apt to keep going than if you try to tackle a $5,000 amount instead of a couple of $500 balances. Got the point? Consider taking on a part time job or business. Think about a roommate. Do you have any items that you can sell? There are many ways to reduce your expenses. Trade cable for netflix or library DVD rentals for free. Bring your own coffee to work instead of Starbucks. Bring lunches instead of fast food. Sure, you are thinking that is only $5 here and $12 there but add it up. Just putting $20 a month onto your debts will pay your debts faster. What I haven’t mentioned yet is to STOP using credit… immediately. You will never get out of debt and you will never raise your credit score if you continue to dig a deeper hole for yourself. While it may feel like you are eating an elephant you do so with just one forkful at a time. It can be done. Plenty of people are or are becomming debt free. Try to save money for an emergency fund ($10 or $20 or $50 at a time) so you don’t have to reach for those credit cards. Check out books at the library by Dave Ramsey and check out his TV show on Fox Business. Ramsey’s Plan will change your life but only YOU can get the plan in motion. Start today. Wanting to get out of debt is easy. The hard part is actually taking the steps you need to take. ACTIONS speak louder than words. Take action!!! It’s not going to be easy or overnight but neither was getting $20K in debt. Do you believe in yourself? If so, get started. If you don’t have the willpower or faith in yourself, check out the link below for professional (and FREE) assistance:
References :
http://www.nfcc.org
how to get out of this without ruining an already precarious credit score.
1. – Stop using any and all credit cards
2. – Pick one with a low balance and start making twice the minimum payment due on that card while all others get their "min. payment".
3. Once that card is paid off…. do a little dance and celebrate.
You deserve it.
4. The paid off card gets put away…. I heard one person that literally put the card in a plastic cup full of water and set it in the freezer…. that card was out of commission. She was a "literal" person and froze that account….
5. Pick the next credit card of your choosing and apply all the money that you used to send to the paid off card plus the min. payment due on this card and pay that card off….
6. You get the idea…. everytime you have one card paid off the card goes into the ice grave, the payment for that card plus any previous card and the min. payment due on the next card…. gets applied to the next one that you are paying off completely….
Yes… it will take years… you may need to get a second job on the weekends for a while… but if you succeed you will have stellar credit and you will have learned a valuable lesson….
References :
Go to http://www.debtyourway.com. Let the professionals help you.
References :