A debt consolidation loan is availed to replace the numbers of loans and unsecured debts such as credit cards, personal loans payment with one loan payment. A debt consolidation loan is also an unsecured loan and therefore does not require a security. This means that rather than hassling with number of creditors you end dealing with one creditor. You can either choose to obtain a loan from bank or financial institution or consider the debt agreement companies in your area.
The benefit for debt consolidation loan is that you make one repayment every month with an option to having a low monthly payment with a longer repayment period. This can give you a peace of mind and help you manage your finances in discipline.
For instance if you have an accumulated debt from credit cards, personal loans, store cards or other loans with outstanding balance of $40,000 and you are making minimum payments of $1500 per month, which is not even helping you lower the amount as the interest covers for the amount you pay. Now by consolidating these debts in to a single loan payment, you can choose to pay it over longer period, thus reducing your monthly payment by 50%, which would come to $750 per month. This is a huge cost saving! You can choose an option to make payments to weekly, fortnightly or either monthly payments depending on your convenience to repay. However, you can repay up to 7 years of maximum time depends on the country you live in.
You will have an option to obtain the loan at variable and fixed rate. With the variable rate option, you make monthly payments with an option to make extra flexible payments at any time without any penalty, thus reducing your debt faster whereas in fixed term loan you can only make the monthly repayments.
While applying for a debt consolidation loan please ensure that you have fully read and accepted the terms and condition along with their guidelines. Also ensure that you choose an institute that will suit your requirements effectively. Inquire about any hidden costs that maybe involved.
Once in agreement you will realize that consolidating your debt will not only improve your capital requirements but also save you a lot of money in the longer run. It will reduce stress in your life not having to deal with several creditors sending bills and debt collection phone calls. You will be making a repayment on a lower interest rate, which will not hike the existing loan. You will notice that you will regain the power to budget with one easy manageable payment. This means that your credit score will improve and you will have a better credit history.
The key is to be committed with regular payments and honor the agreement with the creditor till such time you become debt free.
With so many advantages coming your way, it is best to consolidate your debt today and get rid of so many hassles in your life.
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