Well, here you are, looking at all of your monthly bills and feeling panicked. The credit cards are the most expensive debts for you. Add to them the regular monthly payments you must make, and it looks darned scary… What are you going to do? Can you do anything to help yourself out of this money mess? Actually, you can. You can utilize a loan consolidation to start a debt repayment plan.
Secured vs. Unsecured Consolidation Loans
There are two types of consolidation loans, secured and unsecured. A secured consolidation loan is similar to a mortgage in that it requires something for collateral. An unsecured loan is more like a personal loan that does not require collateral. Most borrowers obtain an unsecured loan consolidation to start a debt reduction plan.
Advantages to Unsecured Loan Consolidation
What follows is a list of several advantages to utilizing unsecured loan consolidation to start a debt reduction plan.
- Bill consolidation – By using loan consolidation, you can pay off of your unsecured bills, like medical bills and credit cards, at one time. Once those bills are paid off, you then have a once monthly loan payment, which can ease your financial burden.
- No more collection calls – Once you have your bills and unsecured debt paid off with a consolidation loan, those pesky collection agents won’t call you anymore.
- Lower interest rate – Unsecured loan consolidations are generally available at considerably lower interest rates than your credit cards have, so your payment each month will be less than most of your present bills are.
- Credit score –Paying off all of your debt with a loan consolidation reflects positively on your credit score.
- Longer term loan – Your debt consolidation loan will be written for a longer term of repayment, giving you more time to pay it off.
- Easier budgeting – Utilizing a debt consolidation loan gets all of your unsecured bills and other debt paid off, leaving you with just one payment per month, which makes it easier to budget.
Before Applying for a Loan Consolidation to Start a Debt Reduction Plan
Prior to applying for your debt consolidation loan, there are a few steps you should take. You absolutely want to shop around. Different lenders offer different interest rates, so you want to locate the lender offering the lowest interest. Don’t sign anything until you are fully aware of the fees and other costs of your debt consolidation loan. Make sure your lender explains exactly what those fees are and how the other costs influence your loan. Do some math. Grab your calculator and add monthly payments plus interest and charges on your current bills, then compare that total with what your monthly loan payment will be. The payment on your loan should be less than your monthly bills are.
Now you know there is a solution to your financial woes. By utilizing a loan consolidation to start a debt reduction plan, you can ease your money stress, get those bills paid off, and start again with a clean financial slate.