Debt consolidation is the process of combining small existing debts into a single large one. The idea is to get a lower rate overall, so if you have existing loans which are on a low rate, keep them as is, and only consolidate the expensive ones.
Monthly Budget Planning. Budget planning is a priority for financial well being. Managing your finances without a proper plan is hard. It’s also difficult to plan when your income and expenditure are roughly the same. However, it’s possible to find out how you can easily pay your debt installments.
Study Credit Reports. You have to verify a report and then try to understand debt consolidation. Get help from others and get the full picture.
Do the calculations yourself. Don’t just leave it to the lender. You decide which plan(s) suit your needs.
Be aware that lenders attach higher interest rates to unsecured consolidation loans. They take a larger risk when they lend money without security and to compensate their interest rates will be higher.
Always go in for lenders with good reputations in the market and lots of good client reviews. They should be in business for years and be capable of easily handling your case.
You can get a considerably lower interest rate for your outstanding overall debt. You will also be able to remove unsecured debts or those that have very high monthly payments. Consolidating debts will also improve a bad credit rating as you will have paid a lot of of your outstanding debt.
How much does a consolidation cost? How much you are going to pay will depend on the lender you have chosen. There are some who can offer you lower transaction costs. They can offer you free consultations. Others pay the closing costs on your behalf, provided that this will be covered by your eventual monthly repayments. There are also some who charge upfront all of the associated fees.
Take advantage of 0% interest-rate credit cards. However, you have to be very careful. You will only be entitled to use this between six to fifteen months. Afterwards, you will begin incurring interest. Before that, if you miss a payment, you lose the deal and interest beings being charged, at 20% or more! So, it’s dangerous. You also have to monitor related fees, like a 5% processing fee. That can be a lot of money. You need to calculate if it’s worth proceeding with.
Go for unsecured loans. This is useful for people who already have a bad credit rating or those who can’t put up any collateral or equity. This is because in unsecured personal loans, you don’t have to present anything except perhaps the bills that you want to be consolidated. Unsecuredl loans present a greater risk to the lender. There’s an increased possibility that you won’t be able to repay the debt. So, consolidations through this method can attract very high rates and terms for the repayment are shortened.