What Kind Of Debt Consolidation Is Right For You?
There are actually three different kinds of Debt Consolidation Loans. Each one is tailored to meet a different need. The first thing you need to do, if you’re considering debt consolidation, is to think about what results you want.
Debt Consolidation for Lower Monthly Payments
Unless you’re a careful manager, you can get yourself over your head with credit card payments without even realizing what you’re doing. You start with one, make some purchases, start paying them off on a monthly basis. Then you get another card, do the same, and start paying that one off at so much a month. Before you know it, several “so much a months” have added up to more than you want to – or in some cases, can afford to – pay every month.
One of the ways debt consolidation can help you is by taking all those monthly payments and consolidating them into a single monthly payment that you can afford. It does this by stretching out the terms of the loan. In other words, you’ll take a bit longer to pay off the total amount. But if you’re interested in this kind of debt consolidation, the peace-of-mind you get from knowing you can live within your budget is worth it.
Beware, though, of debt consolidation schemes that offer you lower payments, but a higher rate of interest than you’re paying now. You’ll be forever paying off the loan and you’ll pay a huge amount of interest, as well.
Want to make sure you’re getting the best deal possible? Use our Debt Consolidation Calculator to compare monthly payments, interest rates and terms of the loan.
Debt Consolidation for Savings on Interest
Remember those credit cards in your wallet? If you’re a typical American, you’re carrying a balance on two or more of those, possibly at an interest rate of something between 15 and 22 per cent, as well. As a result, a lot of your payment is going into paying off the interest, rather than the principal of the loan. It doesn’t take a genius to figure out that, unless you step up the amount you pay each month, it’s going to take longer to pay off those loans. And, depending on how long you take to pay off the debt, the total amount of interest you pay could add considerably to the price of whatever you bought with the card – even double it.
The solution to saving money on interest is a low-interest Debt Consolidation Loan. If you continue to pay the same amount you’re paying now into a low-interest loan, you can pay off the debt faster because you’re paying more principle.
Want to see how much you can save? Use our Debt Consolidation Calculator to compare what you’ll pay if you continue your present credit arrangements vs. how much you’ll save if you restructure your bills with a low-interest debt consolidation loan.
Debt Consolidation to be Debt-Free Fast
The third kind of debt consolidation loan allows you to rapidly pay off your debts so you can be debt-free. To accomplish this, you need to be ready to increase the amount money you pay off each month. Sure, you could do this just by adding a few dollars to each of those cheques you write to your creditors every month. But to really cash in on the savings you can accrue, look for a debt consolidation loan that is low-interest and short-term. By decreasing the overall interest rate on the money you owe, you end up paying off less money in the end, especially if you’re prepared to make larger payments so you can pay it off fast. Wondering how much you could save if you increase your monthly payments and decrease your overall interest rate? Use our Debt Consolidation Calculator to find out.
Shop for a Debt Consolidation Loan
Now that you know what kind of Debt Consolidation Loan you want, it’s time to act. We have a variety of flexible Debt Consolidation Loan options. There’s bound to be one that’s perfect for you. It’s easy to apply for a Debt Consolidation Loan. Just apply on-line using our secure loan application, or speak to one of our customer service representatives.
How Not to Be Debt Free
Debt Consolidation is a great deal for anyone, but remember that you need to have a specific goal in mind: making your payments easier to afford, saving on the amount of interest you pay, or paying off the balance fast. Debt consolidation loans do not get rid of your debt. They just reorganize it to help you meet one of those goals. But in order to accomplish one goal, you have to give in on another.
If you want to reduce the amount you pay every month, for example, you have to extend the amount of time you take to pay off the debt – -and that means the total amount of interest you pay will go up, too. It’s not hocus-pocus. It is simple economics. The same goes for being debt-free rapidly. You have to be prepared to make larger monthly payments. And to reduce the total amount of interest you pay, at the very least, you’ve got to be ready to continue paying out the same amount every month that you’re currently paying. You can have one – but you can’t have them all. Beware of debt consolidation schemes that appear to promise you all three. There is bound to be something wrong with them – and you’ll be the one to pay in the end.
In particular, be careful of the following:
Credit Card Balance Transfers
Every now and then you get in the mail a flyer from a credit card company offering an attractively low interest rate if you’ll just transfer over to them the balance from your other credit cards. Read the fine print, though, and you’ll find out this deal isn’t as attractive as it seems.
Most times, the low rate of interest is only for a few months. As soon as the time limit is up, the interest rate goes up – sometimes to an amount higher than the normal rate of interest for that card. Or to an amount higher than you’re currently paying on the original card. The result: you lose in the end. Instead of saving on interest, you end up paying more overall.
800 and 900 Debt Restructuring Schemes
The “personals” section of any paper is full of ads promising to get you debt-free. When you call these 800 or 900 numbers, though, you reach a fast-talking salesperson who promises to restructure your loans by contacting your creditors for you – for a fee. Sometimes it’s a flat fee, sometimes a percentage of the total you owe. BEWARE.
There are a lot of legitimate organizations out there that can help you restructure your debts – most of them registered credit- counseling agencies. But there are an even larger number of phonies in this newest of American money-making scams. These people don’t come through with what they promised and can leave you in even worse shape than you were before – after pocketing your money as their “fee”. Some even prey on their customers, getting their credit details and then taking a free ride on their victims’ credit.
Before you go with anyone who offers to contact your creditors on your behalf, check them out with your local Better Business Bureau or consumer protection agency. If you’re still not sure – or if you’ve been taken yourself — contact your State Attorney General’s office. They deal with scams of this type all the time and can tell you whether the kind of deal you’re being offered is legitimate.