There are times when you find that you have to pay off your monthly salary in order to meet the repayment schedule of different loans you have taken. At first, you pay the interest for a personal loan and then comes the due date for credit card payments. You not only have to remember different dates for payment for but also need to make that payment on time. It may sometime become very difficult and thus, the easy way out from all this consolidating these unsecured debts.
The process is known as debt consolidation loan , and by taking such a type of loan, you can secure all your monthly payments into a single payment. Thus, you do not have to remember payment dates and maybe the amount that you pay for all those debts may get reduced! The loan that you take after reading reviews can be used for paying off your different debts and then all you have to make is single payment to pay off the debt consolidation loan. Such a loan can be taken from any bank or any other financial institution which provides such loans.
Table of Contents
Methods For Getting Debt Consolidation Loan
There are different ways by which you can consolidate your unsecured loans. Many people may suggest you get it consolidated with your home equity loan. You may do that, but the problem is that with it you are turning your unsecured loan into a secured loan. In case if you are unable to pay off the loan interest on time and miss the payments for few consecutive months, then your home may be auctioned. Now, if you keep your unsecured loans separate from your secured loans, you will not have to face such a situation.
There are different companies that offer a debt consolation loan. You may contact them and learn what their requirement for providing you with such loan is. After you find everything suitable for you do not forget to read about the debt consolidation loan honest reviews as with it, you can know about the company and their procedure. There are many reviews that are written by the companies in their favor.
You can also contact any debt consolidation company. They will do the necessary for making your payment. In such case, your debts will not be consolidated, but your payment will be. Like, you will be sending them one monthly payment, and them on your behalf will make the necessary payments to your creditors.
1. Your debt is not reduced
Most people after handing over the payment to a debt consolidation company feels that the burden is taken away from their head. You may feel light, but the burden still lies on you. You still have to make payment, and thus it’s still on your head. The difference is that you are not making multiple payments but a single one. Even sometimes if you find that some debt is reduced do not get relaxed. You should be very careful till all your debts are paid off.
2. Understand Pros & Cons
It’s true that if you can consolidate different loans, it will be beneficial for you. However, have you calculated the final amount that you are paying after the consolidation? The total process will be considered beneficial only when the final amount of the consolidated debt has a lower interest rate or monthly payment amount. When it gets reduced, it is natural that it becomes easier for you to afford the monthly payment, but there may be another issue. The repayment period may get prolonged, which means that you have to pay off the debt over a long duration. Now what you have to calculate is the total interest that you are paying.
Suppose, the total interest that you will be paying over the prolonged period is more than what you would have paid otherwise then you will not be benefited by taking the loan. The only solution that you get is lower monthly payments. Thus, it is necessary that you calculate the different amounts that you will be paying before you finally agree to take a debt consolidation loan.
3. Be Alert
Now, when you work with any debt consolidation company, you need to be very alert. This is because the industry is full of scam companies. There are companies who will collect payments from you but will not pay those to your creditors. That means your credit score will be hampered as well as your credibility. Moreover, there are companies who will force you to take a higher interest consolidated loan. Again, you need to be very careful.
Before you finally take any loan from any such company, it is advisable to read the reviews. By reading them, you can evaluate the performance of the company before you rely on them.
You also need to be careful about another thing. After the debt is consolidated, you may be able to free up your credit limits. Do not take more loans from them as then your debt problem will compound. You will be paying interest for the consolidated loan, and at the other time, you also have to pay for the new loans that you have taken. Most people ignore this fact, and it leads them to a debt trap that is really hard to come out.
4. Understand and then take action
The best way to combat such a situation is to understand the whole financial scenario. What are your investments and what is the amount of your debt? How much do you earn every month and how much can you use for paying off your debt? After calculating everything and reading the honest reviews, you must take a step. Rely on an honest company who will suggest you handle your debts in the best way.
Remember that when you consolidate the debt, you are trying to reduce the financial burden. Thus, if you are not careful, it may increase in the long run.