Are you currently making more than one debt payment per month? Are your high-interest credit card debts keeping you awake? Is it too difficult for you to deal with your car payments?
If you answered positive to any of these questions, it might be time to take control of the situation and apply for a debt consolidation loan. With this loan product you can:
- direct your debts into a more affordable fixed installment plan;
- probably save on interest;
- deal with your debts on your own;
- find the peace of mind that you are working towards getting out of debt.
If you are thinking about debt consolidation, here are the most important aspects of this product that you should get acquianted with before applying.
Using mortgage consolidation loan
If you own your own home, you can use the equity in the home for debt consolidation. Your capital may be a part of the house that really belongs to you. This means that if your home is worth $250,000 and you have already paid off $100,000 on your mortgage, then the equity capital is $100,000.
You can use this money to get a loan to consolidate all your debts by combining them into one. Of course, this option is only suitable for those who have mortgage and real estate loans.
Using a car capital
As with housing, the car also is your capital. If you need a fairly large loan, then the equity in the car will probably not be able to cover it. However, for those who do not have their own home, this option will be extremely useful.
Choosing an unsecured loan
If you do not have assets that can be used as collateral for a debt consolidation loan, you may want to consider an unsecured loan. As a rule, such loans are issued in smaller amounts than the secured: usually the loan does not exceed $ 15,000. Unsecured loans pose a greater risk to the lender, so make sure you know what criteria you need to meet to get this loan.
Benefits of a debt consolidation loan
- Your payments are transformed into an affordable fixed installment plan with a simple and understandable schedule.
- There is often an opportunity to consolidate debts at a lower interest rate.
- You will know the exact maturity of the loan.
- Service charges and surcharges are usually quite low.
Disadvantages of debt consolidation loans
- As a rule, a deposit is required.
- A good credit rating is not required, but it will be a good bonus.
- An unsecured loan for debt consolidation can be with a high interest rate.
- You still have to pay the entire amount owed. You just simplify the process itself.
How high are the chances of getting this loan?
The bank will present several requirements that you need to meet:
- no excessive amount of late payments on your loans;
- lack of serious bad marks on your credit report, such as credit bills sent to collectors;
- your income is high enough to pay off all debts;
- the amount you owe is not huge.
We know most of these requirements can be scaring. But the good news is that debt consolidation in a bank is just one option for you. You can also choose a consumer loan from a private lender or apply for another loan jointly with someone else.