What is it?
A consolidation loan debtis generally a loan from a financial institution that allows you to pay some or all of your creditors into one payment. You will now have one loan: your financial institution.In addition to streamlining your debts into one payment, a debt consolidation loan can provide you with a lower interest rate than that required by your creditors - so you save on interests. This can be particularly useful if you have outstanding debts with high interest rates (eg, interest rate credit cards or store financial card).In most cases, the financial institution will pay for you all your debts and in turn it is to her that you will make one monthly payment.
Check with several financial institutions before choosing your debt consolidation loan because interest rates offered by competing institutions may vary.
Check with several financial institutions before choosing your debt consolidation loan because interest rates offered by competing institutions may vary.
Types of eligible debts
This option is suitable for debts from eg your credit cards, utilities or other consumer loans. However, these are not all debts can be consolidated into a consolidation loan - the mortgage can not be included, for example. It's your financial institution will be able to tell you precisely which of your debts you will be able to pay this loan it gives you.
Who this option appropriate?
To qualify for a consolidation loan, a consumer must have an acceptable credit rating and sufficient income to demonstrate that it is able to manage this loan (which means that it must demonstrate its ability to make monthly payments of consolidation loan in addition to paying its regular expenses and monthly bills).
Warning - a credit rating tainted decrease your ability to get a consolidation loan, it's why you need to act as soon as possible.
Warning - a credit rating tainted decrease your ability to get a consolidation loan, it's why you need to act as soon as possible.
How much does it cost?
It costs nothing to apply for a loan to consolidate all your debts into one. However, fees may be required to open your file. Ask the financial institution you choose.
Do's and remember ...
- Before the meeting with a loan officer of the financial institution, make a list of your current debts in order to establish the total amount. You do not have to include all your debts, but it is always best to tell the attendant that you have other debts. As should check your credit report to make a decision about a consolidation loan, it will have access to all this information anyway. So play fair play.
- If the rate you offer the financial institution seems too high, do not hesitate to compare with other financial institutions and attempt to haggle. Some advisors recommend budget to shop from 3 institutions because "excessive increase in the number of inquiries can hurt your credit score."
- Be advised that many finance companies also offer this kind of service, but the interest rate is usually higher. Before signing a contract, make sure you read the terms and conditions (loan term, interest rate, special conditions, etc.) so you know exactly how much cost you the loan in the end.
- Generally, when the loan is granted, the financial institution will pay your outstanding debts to your creditors. In some cases, depending on your ability to convince your institution that you are on the right path, you can negotiate directly pay your creditors yourself.
- Your financial institution may close open accounts you have with the stores, companies or issuers of credit cards with which you have credit to make sure you do not take out more debt while you pay your loan consolidation.