Consolidation Loans Overview

2007-03-08 10:33:40

( Financial )



Debt consolidation loans are unsecured personal loans and because creditors consider them risky loans, they are usually more expensive and not easy to get if you are in a lot of debt. You should also consider other loan consolidation programs if the interest rate is is too high and term of payment is more than ten years. However if the loan consolidation rate is reasonable, then you will save money. Remember to compute the total cost of the consolidation loans from start to the last payment. Also start paying the loans with the highest rate first.

Credit cards can be used for consolidation loans. You may get a lower rate if you have a good credit rating and since this doesn’t require collateral you aren’t risking your home. Contact your credit card company and ask what interest rate they will give if you transfer the balances of your other cards to theirs. Shop around to get the best loan consolidation rate. Also ask for a fixed rate or waiver of transfer fees.

Retirement loans can also be used for consolidation loans if you have a 401(k), 403(b) plan or other pension plans. Loan consolidation rate from borrowing from your nest egg is low and no credit check will be done. Be smart and make sure to replenish your nest egg and start an emergency saving fund.

The riskiest way to consolidate loans is through a home equity loan. You should only consider this if you are certain of your ability to make monthly payments because you may lose your home. Be careful since there are many predatory credit lenders who prey on low-income people who already have bad credit and cause these people to sink further into debt.

Choose the loan consolidation programs that will result in a lower total cost. Commit to a plan to payoff your loan within three to five years.This entails putting a plug on spending leaks and learning to live within your means. If you can't afford it in cash, you can't afford it!


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