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  • All you need to know about debt consolidation

    All you need to know about debt consolidation

    A debt consolidation is a way to refinance a debt. A person can take out a new loan or line of credit that is large enough to pay off their loans. The outstanding debts are then repaid and you begin to repay the new loan or line of credit, which usually have a lower rate or a simpler payment schedule. Paying off your debts is a great way to get your finances back and rebuild your credit.

    A debt consolidation loan is like a standard personal loan, but the money is used to pay off the debts. Since all debts are repaid, they are consolidated or “consolidated” into a new loan.

    A debt consolidation loan can be used to pay off credit card debts, pay late bills, auto loans and more. When you repay your debts through a consolidation loan, you only need to repay the new loan. Your payment schedule is thus simpler and the interest charges are lower, especially if you had late payments for your old debts.

    How to apply for debt consolidation?

    The bank assesses the risk you represent. They study your credit history, debt ratio, repayment behavior and ability to pay your loans. If the bank feels that you would have had trouble repaying the other creditors, it may not give you the loan.

    Banks may require a guarantee through an endorser. If you have a good job and equity on your home, for example, you could be a good candidate, depending on the amount of debt to consolidate.

    How does a debt consolidation work?

    1. Ask for an online loan quote to find out how much money you can borrow. It will only take a few minutes and it will not affect your credit score.
    2. If the bid is right for you, a specialist from the respective financial organization will contact you. He will recommend a loan solution and a payment plan tailored to your needs and your budget.
    3. Visit the respective branch to complete the loan application process and get your debt consolidation loan.

    Why do people ask for a debt consolidation loan?

    People are asking for a consolidation loan for several reasons:

    • A debt consolidation loan consolidates bills and debts to make a single payment. It is therefore easier to manage the repayment of debts.
    • A simplified payment schedule allows you to repay your debts faster and, therefore, save on interest charges
    • An easy-to-manage payment schedule will allow you to make timely payments, demonstrating good repayment habits on your part.
    • Over time, a positive payment history will help you rebuild your credit.

    What is the best way to consolidate your debts?

    The best way to consolidate your debts depends on your goals. If you like to have a simplified payment schedule, then choose the monthly payments, since they involve only one payment per month and therefore only one date to remember. If you like to repay your debts faster choose installments every two weeks and a shorter loan term.

    The goal of a debt consolidation is to free you from your debts. It is therefore important to keep control of your new loan. Regardless of your payment schedule or the length of your loan, consider setting up automatic payments. The money will be withdrawn from your account on the day of your choice. With automatic payments, you no longer have to worry about forgotten or late payments. So you stay on track and repay your consolidation loan on time.

    Why debt consolidation loans are recommendable?

    If you have multiple bills and unpaid debts, debt consolidation may be the right solution for you. Debt consolidation is especially useful if it is difficult for you to track your payments. If you are thinking of getting a debt consolidation loan, try any debt consolidation calculator from any financial organization offering debt consolidation. The calculator lets you see how much you can save by paying and consolidating your bills with one payment.

    Advantages

    The main advantage is certainly the reduction of stress related to multiple payments and especially to their deadlines. Also, the interest rate for a debt consolidation is usually lower than that to pay to your creditors and these will be paid in full, more quickly. It is obviously easier to manage only one payment, your chances of forgetting decrease considerably.

    The inconveniences

    Even if the consolidation of your debts allows you to save on interest payable, you must keep in mind that your overall debt still exists. Ignoring this detail, the possibility of getting into debt is watching you. It will therefore resist the appeal of an “empty” credit card, as attractive as it is.

    Conclusion: By consolidating, the overall debt remains the same, contrary to the consumer proposal. And even after consolidating credit card balances, remember that the amount of debt to be repaid will increase if you continue to use them.It’s never too early or too late to take control of your finances. Give yourself some time to review your financial habits and make sure you are on the right track in achieving your goals. If in doubt, your financial adviser can help you.

     

  • 7 Loan Options for People with Bad Credit Ratings

    7 Loan Options for People with Bad Credit Ratings

    Every day, so many people apply and get approved for both personal and business loans, however, a surprisingly large number of them gets rejected, as well. Most commonly, this is due to the bad credit score of the applicant that makes them into an unreliable investment prospect from the standpoint of the credit union. Unfortunately, developing a bad credit is not just something that happens as a result of negligence. A poor judgment, a small lapse in your schedule and even a lack of knowledge on this topic may lead you to develop a worse credit score than you deserve. Nonetheless, even in this scenario, all is not lost. Here are several loan options for people with bad credit ratings.

    1.      Secured loan

    The main reason why a person with a bad credit can’t get approved for a loan is due to the fact that a bank or a credit union doubts that they’ll return the borrowed money. This usually isn’t a problem with secured loans is due to the fact that they require a collateral instead. Getting a secured loan would require you to offer a valuable asset as a guarantee. Most commonly, it’s something like a property or a vehicle, while your investments may also be an option, in some cases. It’s also important mentioning that the repayment period of this loan is somewhat longer, which isn’t necessarily a good thing. A longer term means that you’ll be in debt longer, even though monthly payments will be somewhat lower.

    2.      A consolidation loan

    The next idea that you should consider is applying for a debt consolidation loan. In the introduction, we mentioned the phenomenon of having a bad credit score and this most commonly comes from a multitude of already existent loans. Things might get even worse, due to the fact that you’ll most likely have a problem to keep track of all the payment dates, interest rates and other factors revolving around these loans. Getting a debt consolidation loan can, therefore, resolve your short-term financial issues and help you manage your debt and your finances in a more efficient manner.

    3.      Loan from a personal acquaintance

    This particular idea is quite controversial, seeing as how it has some obvious positive and severely negative sides. On the positive side, a friend or a family member is not going to ask you about your credit score. Second, your previous reliability, in relation to them, might determine their willingness to lend you the money. The best of all is that you have the ultimate flexibility when it comes to agreeing on a payment plan. The problem is that you’re putting a relationship at risk. Aside from this, there’s only so much that your friends and family have to lend you, even with all the best intentions.

    4.      P2P lending

    Another viable option would be for you to go for a P2P (peer-to-peer) lending option. The benefit of this form of lending lies in the fact that there’s much less paperwork, even though some platforms have strict rules and qualification requirements, as well as the fact that your bad credit score won’t be a huge factor. The downside of this method lies in the fact that it might take a while until you receive the funds, while sometimes, you might be in a rush to get the money. Moreover, it’s highly unlikely that you’ll be able to receive all the funds you need from a single source, which means that you’ll have to look for multiple lenders.

    5.      HELOC

    The term HELOC stands for a home equity line of credit, which offers one an option to use the equity in the home that they have as a collateral for a loan. The advantage of this lies in the fact that you don’t have to own an entire home, seeing as how having a share of 20 percent in it may be more than enough. Another perk of going with this option lies in the fact that you get a lower rate (even lower than you would have with a credit card). On the downsides, once you’re done, you have to pay the closing costs and there’s always a small probability that the bank will cancel your line of credit. Most importantly, you’re putting your home on the line, which, although necessary, never feels quite right.

    6.      Bad credit loan

    It goes without saying that not all lenders abide by the same standards. Some companies are willing to be more lenient and grant loans even to those with not-so-shiny credit record. Of course, in this case, the terms under which you’re receiving the loan are not that great either, seeing as how the lender is also taking a greater risk. This usually means a somewhat higher interest rate, amongst other things.

    7.      Boosting your score

    Finally, if you’re not in that big of a rush, you could always set aside some time to boost your credit score. Pay off some of your debts, become more conscientious when it comes to due payments and work your way up towards boosting your rating. As we’ve already mentioned, if time is of the essence, this will not be a valid option, yet, it’s worth considering afterward either way.

    In conclusion

    At the end of the day, even though you do have options even with a bad credit rating, you shouldn’t neglect your credit score for too long. There’s a reason why this matters, seeing as how a future employer might check your score during the vetting process, which means that this will determine whether you get hired or not. Aside from this, your credit score might also play the role in your ability to get better terms for your insurance policy. Moreover, even though you have so many options with bad credit scores, with a decent one, you would have even more of them, which is alone a reason good enough to work a bit on this. Still, it’s more than reassuring knowing that not all is lost.