Debt Consolidation

Your Best Options For Debt Consolidation Relief

Debt consolidation loans are gaining in popularity of late, mostly because they sound like the best option for people struggling with debt. Your best plan should be to consult with a reliable debt relief firm before taking on more debt, because there are some restrictions as to how much of your total debt can be consolidated, and on what type of debt can qualify for such a loan. Even if your situation cannot be appeased by the typical consolidation loan, there are other options that you might consider to help ease your current debt situation.

Equity Loans

One option for debt consolidation is actually custom made for homeowners today. If you have had your home for a number of years and are not in arrears on the mortgage or even if you have paid it off, you can qualify for a home equity loan through the financial institution that secured your original mortgage. You also have the option of refinancing your home for a lower monthly payment, and you can use the overage to help counter your other existing debt. Many homeowners use equity loans to pay off bills and make improvements on the home, raising its resale value, should they need it later on.

Unsecured or Personal Loans

If your credit situation has not reached a critical stage, you may still be able to get an unsecured loan to cover the amount of debt that you owe. Some lenders have relaxed their requirements, and may not ask that you secure the loan with collateral, like a home or car. Personal loans are another option, especially with traditional lenders fluctuating interest rates in hopes of gaining new customers. There are limitations on how much can be borrowed in such situations but if your total debt is under $10,000, this may be a safe remedy for you, even in today’s economy.

Debt Relief Companies

The best way to look into the possibility of taking on any debt consolidation loan is to look to debt relief companies for advice on proceeding. Many of them offer debt counseling services, as well as debt settlement opportunities. By signing on with a reputable firm, you can explore the possibility of having them negotiate with your creditors before applying for any loan, and save yourself money in the process. If they are successful in their negotiations, then the total amount of money that you would owe would be considerably less, and you would not have to borrow more than you need to pay everyone off.

What Is Meant By Debt Consolidation?

A popular term that you will see bandied about in debt relief advertising is the debt consolidation loan. It is meant to lump together all of your existing debt into one sum and the loan amount will reflect that sum, so that you can use the proceeds to pay off all of your creditors. Sounds great, doesn’t it? Problem is, there are almost as many scams out there as there are true solutions, so before you approach any advertiser with your accounts, you may need to do a little investigation before making a decision you may regret later.

Be Aware of Scamming Possibilities

The usual rule of thumb that anyone seeking any type of credit should take to heart is “if it sounds too good to be true, it usually is”. You will see ads everywhere, in print and on the internet, that promise to completely eliminate your debt by using their “affordable” debt consolidation loans. A wise person seeking aid would do well to do a little investigating before signing on the bottom line. The majority of these ads are placed by two types of firms: loan brokers and actual lenders.

Loan Brokers

Loan brokerage firms are not in the business of making personal loans to anyone and they are not licensed to do so. What they do is they take your credit information, including the creditors you owe money to and the total amount of your debt, and they run it through their own network of loan providers. As part of their package, they offer their own version of debt counseling and actually charge you a fee if your loan request is not approved by their lenders on the first go round. These kinds of firms can seriously take advantage of desperate people seeking to get out from under, and if the loan does not come through on the first application, they will continue to seek out a lender for you, for a very significant fee for their efforts.

Lenders

The lenders that place consolidation loan ads are not all scammers, far from it; however, it can be hard to separate the good from the bad. The process is pretty much like applying for a regular personal loan wherein you fill out an application listing all of your existing credit and the amounts owed. There are some firms that will have requirements as to the total amount owed. Some of them will not even consider taking on your loan unless you have at least $5000 or more in debt and they prefer that most of it be in credit cards.

Even if you do get the approval, make sure that you read the debt consolidation agreement very carefully. Two favorite tricks that are not always disclosed up front are the amount of the interest rate and how long you have to pay it back. If you think credit card interest rates can be bad, you have not seen everything yet. Some of the disreputable lenders will charge 50% interest or more for the life of the loan and the payments could easily be more than you would have paid otherwise. You will also see limits on the loan term, with some requiring repayment within 12 months or additional repayment fines could be levied.