A Guide to Consolidation Loans.

What is debt consolidation?

Debt consolidation is the process of combining a number of different debts into one single loan that has an overall lower interest rate. It works well in a situation where you have multiple credit cards or unsecured loans, and can save you money in interest payments. By taking out a new personal loan to repay other debts, you can get a fresh term loan with a lower interest rate.

Why do people consolidate their debt?

Why do people consolidate their debt?

There are a number of reasons why people consolidate their debt, including:

• Simplify your monthly repayment schedule. Owing money to a number of different lenders can be overwhelming. If you are trying to pay off multiple debts at the same time, these will have varying interest rates and repayment dates, which can be confusing and hard to stay on top of. Consolidating the debts into one loan will mean there is just one repayment date and one interest charge, making it easier for you to keep track of your commitments.
• Lower your interest rate. Taking out a new personal loan to cover your current debts will mean you obtain a lower interest rate on one loan, rather than varying interest rates from numerous sources.
• Know when your debt will get paid off. Having a number of loans and credit cards with varying end dates can make you feel like you’ll never get out of debt. A new fixed term loan will mean you will know when the debt will be paid, making it easier for you to plan out your finances.

What types of debt can be consolidated?

There are a variety of different types of debt that can be consolidated, including:

• Credit Cards
• Medical Bills
• Unsecured Loans
• Unsecured Personal Loans
• Unsecured Personal Lines of Credit
• Collections, Autos in Repossession

Steps to take to consolidate your debt.

There are a variety of different types of debt that can be consolidated, including:

• Create an inventory of your debts. Write a list of all of your outgoings so you can visualize your debt, how much you owe and to whom.
• Review your loan options. Do some research on what loans are available and compare debt consolidation loans.
• Calculate repayments and interest. Work out exactly how much you will owe each month and have a sound understanding of what the contract means for you.
• Apply for your chosen loan. Put in an application for the loan you want, and wait to hear if your application has been accepted. Your lender will then help you come to an agreement that is manageable for you.
• Understand your payment schedule. Ensure you have a good grip on when your payments are due. Missing payments will incur charges and lead to additional debt.