If you’ve got several accounts on your credit cards with different interest rates, your calculation of payments might appear to be somewhat complicated. In order to simplify the financial position, you may get involved into the loan consolidation, which transforms your payments into a single one with considerably low interest rate. The new loan you take will cover the pervious loans, so the creditors will no more bother you.
On the other hand the loan consolidation is not as harmless as it might look like. The main feature is that due to the long term of payments you will give off a lot more money than you’d have given to your creditors.
For your success in the field of the loan consolidation study these steps
1) Get your FICO score and the credit report
The results of your loan negotiation will be mostly based on the credit score. So you shall find it out before resorting to this option. If your credit score is a good one, you will most likely get the loan with low interest rates, especially if your CC history improved after getting the last loan you’re dealing with.
2) Consider the possible options
Before you decide to resort to the debt consolidation loan, weight your chances.
- If all you need is to save money, do not get involved in the consolidation proves and just reorganize your bills.
- If your credit history is fine, make a call to the credit card company and talk them into lowering your credit. If it doesn’t work, transfer your balance to the card with the lowest interest.
- Talk to the credit counseling agency for them to give you advices of how to plan your budget. You may get the consultation without entering the debt consolidation program.
- Sell your car in case you can’t afford paying for it. The money will bring you more profit then the car staying by your house.
- Contact your mortgage lender. If your payment troubles are temporary, they might suspend your payments or accept the option of reducing the payments.
- Borrow the money from your life insurance. This is usually allowed and offers you the option of how to pay off the debt fast.
3) Get to know the difference between the debt management, Debt negotiation and of course the consolidation loan.
Now every company offering the service of lowering your payments and having the word “consolidation” in its name is what you need. They might offer management, settlement, consultation or even the procedure of bankruptcy. Here are the main features of the consolidation service:
- The consolidation loan is the simple loan with low rates. It’s given to you in order to pay the other smaller loans with its help. After accepting it you do not owe to a lot of creditors, but from now on you owe to a single lender. This has nothing to do with debt management or negotiations.
- You can use the debt management programs in order to reduce the monthly payments, still this kind of the program works differently. The debt management agency will stay between you and your creditors, trying to negotiate them on your behalf.
- Debt negotiation lets you sell the debt for less than you owe. In other words you will have to pay less than you were given by the creditor after all the negotiations are settled down. Be careful about possible fees the company might charge you of.
4) Try to pay off your debt as soon as possible
A lot of people love the loan consolidation for the lower monthly payments. Still do not forget that this is only the result of spreading the sum all over the longer period. This means you will pay more in total. So you’re your pocket it will be beneficial to pay off the loan in a shorter term possible.
5) Find the correct type of loan
The debt consolidation loans can be of secured or unsecured.
- Secured loan in usually backed up by any kind of the collateral, such as a house, a car, or something else that is valuable and is easy to sell. These loans have lower interest rates and look attractive. However keep in mind that in case you won’t pay it in full, you will lose your property.
- Unsecured loans are safer and do not involve the risks of property. However the interest rates are higher here. Still there are situations when people are not able to take this option and resort to the secured loans due to the lower rates.
6) Look for the options
Before resorting to the loan consolidation company, take your time to compare the offers of various companies and find the optional one for your case. Compare the rates and the time of payments; take the possible fees into consideration. Write down the offers, so it will be easier for you to make your choice.
7) Compare the payments in the offered consolidation loans and the other consolidation offers
Do not limit your attention to the monthly payments, since this is the obvious way for the company to get your attention. Instead check out the amount you will pay for the loan with the stated interest rate and fees.
8) Be attentive while reading the contract
Read in as many times as it’s needed for you to get the complete understanding of each phrase and fact. If some features are not quite clear for you, get the layer to look through the contract and explain everything.
9) Do not agree on the credit insurance
Some lenders might offer you the insurance for your credit. If the insurance fact is hidden from you or featured as the necessity for your application to be applied, notify the authorities like Federal Trade Commission or any other up to your choice.
10) Get your loan finalized
Complete the full application form in case your loan is not approved yet. In case the interest rate is different from what you were told, do not hesitate to find out why, since it might appear to be the sign of condition changing.
11) Get a control over your spending
If you’re up to consolidation loan, this means your budget is in trouble. This is the right time to revise your spending and keep them within fixed limits.