Most Americans have $10,000 or more in debt, with most of it owed to credit card companies. With several different payments and high monthly interest rates, getting out from under all that debt can seem impossible. However, debt consolidation loans can make the seemingly impossible possible. Debt consolidation loans can put all of that debt under a single, low-interest monthly payment. They can get all debt levels, small and large, under control. Read on to learn how to use a debt consolidation loan to get yourself back in the black.
Types of Debt Consolidation Loan
There are two kinds of debt consolidation loans: secured and unsecured. Secured loans use some form of collateral, such as home equity, to get the loan. They usually have better terms and interest rates than unsecured loans. No collateral is needed for unsecured debt consolidation loans, and it is usually easier to get approval for them than for secured loans. It should be possible to get an unsecured debt consolidation loan with a debt-to-income ratio of as much as 50% and a credit score of 585 or more.
Applying for a Debt Consolidation Loan
Applying for either kind of debt consolidation loan is usually a relatively simple process. It can usually be done online, and involves filling out just a few forms. The debt consolidation company will then contact various banks on your behalf, sending you the list of consolidation loan offers that it receives.
The Benefits of Debt Consolidation Loans
A debt consolidation loan allows you to make one payment a month instead of several. Additionally, your interest rate should be lower, and you can probably even get an extended repayment term if you want. This would make your monthly payments lower, although it would increase the amount of total interest that you pay. By making the monthly payments easier to make, a debt consolidation loan can even help you raise your credit score. Furthermore, it can also keep you from defaulting on your current debts, which would be very bad for your credit score.
The Drawbacks of Debt Consolidation Loans
If you extend the term of the loan by too much, you can end up paying a lot more in the long run. Also, if you don’t shop around for different loan offers, you might not get very beneficial terms. Additionally, if you opt for a secured loan using your house as collateral and it becomes devalued, you might end up paying more than your home is worth.
Choosing a Good Debt Consolidation Loan Company
A good, trustworthy debt consolidation loan company should have no application fee and no hidden charges, like Directions Home Loan. The loan fees should be close to the national average, and the application should be both short and simple. Contact Directions Home Loan and speak to a loan officer.
If you are thinking about getting a debt consolidation loan, take your time and do the research before signing anything. Know what you should be able to expect, and compare as many different offers as you can. Choose the offers that best balances your short and long term needs. If you carefully consider your various options, a debt consolidation loan can help you manage even seemingly unmanageable debt.