If you’ve heard of debt consolidation loans, but you aren’t sure how they can help you out, yet you would like to learn more and see if it is worth applying for one, then read on about these special loans and their advantages.
What are they?
Debt consolidation loans are loans you can get from banks, credit unions or specialized lenders. These are a form of refinance since the lender agrees to pay off your debts such as outstanding credit card balances, medical bills, auto loans, mortgage loans and others. With these loans you can get rid of the multiple loans and their separate monthly bills and unite them into a single debt that is easier to keep track of.
Who offers them?
There are many types of lenders and financial institutions offering these debt consolidation loans. You can get these loans from specialized lenders, and they usually have lower credit score requirements compared to banks. Banks may have a higher credit score eligibility standard but lower interest rates, and most of the times the upper limit is higher as well. You can also get a loan from a credit union or even from a payday lender. A payday loan will actually give you the money directly that you can use to pay off the other bills, but due to the high interest rates and short repayment window these are generally not recommended (http://www.toptenreviews.com/money/debt/best-debt-consolidation-companies/).
The two types of debt consolidation loans
When it comes to consolidation loans you can talk about unsecured and secured loans. Unsecured loans won’t require any physical guarantees and the lender will pay off your debts only based on your promise to repay. You can usually pay off credit card balances, other unsecured debts as well as medical bills. With secured debt consolidation, you need to guarantee with your house, car or with any other physical asset. These loans will cover a wide range of debts from auto loans to mortgage loans and a host of other types. If you are looking to get a lower interest rate then you should definitely go for the secured ones since these have much lower interest rates.
An obvious advantage of getting a consolidation loan is that you get to worry less about knowing which bills is due when, etc. Instead of having to juggle multiple debts you have one to take care of. The lower interest rate also comes in handy as you can save quite a bit of money over the life of the loan. Some lenders usually try to harass you by repeatedly calling you at your home – with a consolidation loan, you ensure that you won’t be bothered again. If you choose secured loans, you also get better repayment terms and can stretch the loan over many years.
So don’t let multiple debts and credit card balances get the best of you and rob you of your peace – get one of the debt consolidation loans offered by a local lender as soon as possible.