If you are knee-deep in debt with several loans running at the same time, you must be all too familiar with the pains of managing different payment dates, amounts, and interest rates, and you must be getting tired of dealing with multiple creditors. There is a solution to this madness. You can try consolidating all the different loans into one large one. It might bring several immediate benefits lower interest rates, easier repayment terms, and more manageable amounts per month. Moreover, you can bid goodbye to the stress of constant creditor calls and harassment!
Debt consolidation can significantly reduce the burden of monthly repayment, and you may get a long time to pay off the sum. You can use this time to get your finances under control. Experts say that this benefit depends on the borrower. If you are reckless with your spending and continue to make poor financial choices, a longer tenure might make things worse! Once the different loans are consolidated and paid off, you would no longer have to deal with the multiple creditors. You will have only one point of contact.If you are thinking of getting your loans consolidated, there are primarily three ways of doing it.
Credit card balance transfer
You can consolidate all your existing or outstanding loans into one if they all belong to different credit cards. The debt consolidation company will negotiate the final settlement amounts of each of the existing credit cards. This agency speaks to each of those card issuers, and as per the agreed amount, transfers those balances to the new card and gets a letter confirming no dues.
Home equity secured loan
Unsecured personal loans or credit card loans are usually costlier than secured loans because they do not have any underlying security provided to the lender. If the borrower has a house in his name which is unencumbered, then that property can be used to take a secured loan at a much lower rate of interest. The benefit of such a credit is that the monthly repayments reduce significantly, but the risk of taking such a loan is that if repayments are not serviced on time, and the loan becomes overdue, the lender has the right to seize the property. That is why you should only go for a secured loan if you are confident in your abilities to pay off the amount on time.
Unsecured personal loan
If you do not have any collateral to provide or if you do not feel confident enough to offer your assets as security, you can also go for an unsecured personal loan to consolidate the existing loans. Since it is unsecured, you may not get an amount that is large enough to cover all the current loans.
Any of these methods can be used to consolidate existing loans, and get some breathing space from the several existing loans. If you want your financial status to get back on track, you will have to maintain better control of your spending.