Debt Consolidation Loans – Finish Off Your Debts Easily
Debt consolidation loans are available to all types of borrowers who are suffering from multiple loans with varying interest rates, some of which may be high credit card interest rates. The debt consolidation loans can be borrowed as secured or unsecured money, depending on what collateral the borrower may be able to offer. Bad credit borrowers can also apply for debt consolidation loans as well. Paying lower interest rates on consolidated debt will definitely help most consumers finish off your debts easily and much faster than if you stick with the high credit card debt for example.
How do Debt Consolidation Loans Help Borrowers Finish Off Their Debts Easily
Imagine a consumer with a small personal loan, several credit cards with balances on each and he is overdrawn on his checking account. This consumer is perhaps paying a regular interest rate on the personal loan, high interest on the credit card balances and possibly a high interest rate on his overdrawn checking account. By consolidation of all of this debt into one non secured personal loan at a relatively low interest rate compared to the credit card interest rates and his checking account, he may save hundreds of dollars a month in interest payments alone. By applying these savings to the personal loan, he will be able to finish off his debts easily and earlier than he might have otherwise. This is one of the best ways to pay off debt more quickly. Use your interest rate savings to pay off your debt more quickly.
It may still take you four years to pay off what was originally a five year loan using this method, however an entire year of not needing to make payments is a huge savings. By using the interest you would have paid on high interest debt, to pay down the low interest personal loan more quickly you can achieve significant savings. Each consumer will have to look at their personal situation and compare the two scenarios to see how much they will actually save. Your loan officer at the bank or the broker you deal with can help you with the calculations.
Add up your current monthly payments for all of your debt that you plan to consolidate. Ask your lender to let you know what the monthly payments would be on a low interest consolidated loan would be and compare. The difference will be what you are saving in interest every month and if applied as extra payments to the debt will save you even more interest and pay off your loan much more quickly.
Will a Secured Debt Consolidation Loan Make a Difference?
Consumers that can offer some kind of security for their personal loan can usually negotiate a lower interest rate for their personal loan than they would be able to with a non secured loan. This means more savings for them in terms of interest owed on the loan, which can be applied to the loan as well, reducing your payment time even further than just discussed with a non secure loan.
Security for the personal debt consolidation loan is usually in the form of property, either your home or car or some other identified security that has real value that can be sold to pay for your loan should you not be able to repay the loan for some reason. Stock certificates are sometimes accepted; however they are extensively discounted in terms of the value to guarantee that the lender will be able to recover his loan. If you have a home with equity, using the home as security for your debt consolidation loan can save a great deal of money. Just remember that the lender can lay claim to your home and arrange to sell it if you are unable to repay the secured personal loan. If you meet all of your monthly payments on your loan or mortgage, you will have no problem what so ever.
How Fast Can you Finish Off Your Debts?
The answer really depends on your personal situation. The size of your debts, how much interest you are currently paying for the existing debt and what the interest rate and term will be for the new debt consolidation loan. It also depends on whether you can arrange for a secured loan as discussed in the previous paragraph or if it is unsecured. Consumers can pay off their debt consolidation loans much faster as well if they apply the interest that they saved to the debt consolidation loan over and above the regular monthly payment. Applying the savings is an excellent method that many consumers use to finish off their debts easily.
By the way if you are dealing with store type credit cards, the interest rates can be as high as 28%, which increase your savings significantly when you apply these debt consolidation approaches. Compared to a personal loan rate of even 10% which is high, you are paying 18% less interest when you consolidated this store credit card debt. This is significant and can make a huge difference in a person’s cash flow and overall financial situation when you eliminate this kind of debt.
My Mortgage is Up for Renewal, Can I Consolidate My Debt On My Mortgage?
The answer is yes although it is a little more complicated than arranging for a personal debt consolidation loan. First you must make sure that you have sufficient equity in the home to place an increased mortgage against it. Second your lender will likely want to have your home appraised to officially establish the value of your home. He or she can then tell you how large a mortgage you can have on your home and compare it to the current amount of the mortgage plus the debt consolidation you plan. Once you decide to go ahead a lawyer will register the new mortgage and the incremental funds will be advanced to you for consolidation of your debt.
Once completed, you will have one low interest monthly mortgage payment to make instead of a mortgage payment and several other payments on high interest debt. Again use your savings in total interest payments and apply these savings to your mortgage and pay it down more quickly to save even more money. This is a great way to pay off debt quickly and reduce your total cost of borrowing money.