If you have ever considered a consolidation loan to facilitate charge card debt reduction, now is a good time. Banks are reported to be loosening credit standards and interest rates are very low. But consolidating debt only makes sense with a sound strategy that calls for a thorough evaluation of your situation and long-term financial goals. Source of article – Do your homework and think hard about a debt consolidation loan by Personal Money Store.
Be aware of debt consolidation risks
Debt consolidation usually makes sense on paper for somebody struggling to settle credit card debt. Some don't realize that credit cards are more expensive than practically any other form of borrowing. The interest rate on a credit card is generally higher than getting an short term loan from your bank. A strategy adopted by many people to consolidate debt is achieving lower monthly payments and a lower interest rate by using their home as collateral. This is the primary risk involved with consolidation loans: taking unsecured credit card debt and consolidating that debt into a secured debt. If for some reason the borrower defaults, the lender takes the home.
What method of borrowing will you use?
Debt consolidation loans need to be well thought out prior to obtaining them. Relieving symptoms of bad debt won't cure the issue at hand. There is so much more to it than that. There is much more to debt consolidation than just increasing your monthly cash flow. Keep in mind that the less you are paying a month the longer you are paying overall, which within the long run costs you more. It is however, easier to make payments when they are lower also.
Don't do debt consolidation wrong
Debt consolidation, however convenient it may appear, is not a quick fix. Borrows should be well informed. Most importantly, make sure you know your credit rating. Make sure you know what you owe and all aspects of it. There are essential things you have to know like monthly payments of what you owe, rate of interest, payoff amounts, and more. All of this details will help you better decide if debt consolidation is worth it or if there are other routes more effective. Be sure that you know what kind of interest rate your credit rating qualifies you for. Shop around. Compare interest rates, monthly payments and fees. Lastly, you’ll want to add up all your current monthly payments with the consolidated option to make sure you are really getting help for debt.
Articles cited
Americas News Online
americasnewsonline.com/debt-consolidation-a-nightmare-or-answers-to-your-prayers-911/
Bankrate.com
bankrate.com/finance/credit-cards/are-credit-consolidation-loans-risky.aspx
Creditcards.com
creditcards.com/credit-card-news/2010-q3-senior-loan-officers-survey-lending-standards-1276.php
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