A debt consolidation loan is a single loan that is taken out to cover several existing debts. A debt consolidate loan will enable you to combine all your current debts into one manageable monthly repayment, with a low interest rate and over a long term.
If your current debt repayments are taking up a large chunk of your income and you are finding it difficult to make ends meet then you may be already missing monthly payments. If you find yourself in this position then you should consider a debt consolidation loan, because the chances are that you will be suffering from some of the symptoms of stress which include irritability and disturbed sleep. That’s going to affect your life on a daily basis. Taking out a debt consolidation loan will relieve this pressure; the relief of not getting calls from creditors and debt collection agencies will make a huge positive difference to your frame of mind and your quality of life.
If you are missing payments then your credit score is going to be affected if any of your creditors issue a default against you. By opting for a debt consolidation loan before things get to this stage you will be able to limit the damage done to your credit score. Defaults stay on your credit file for up to six years and will adversely affect the amount of credit available to you and interest rates that you are offered.
Multiple concurrent debts mean multiple concurrent interest rates. Although you may be in a position whereby you can meet the monthly repayments without too many problems, the interest charges on the debt are likely to be so high that you are barely making any impact on cutting the debt itself – you are merely paying the interest off or even worse, not covering the interest repayment itself each month so your debt is actually increasing! A debt consolidation loan will allow you to merge all that interest into one low rate meaning that you are paying off the debt as well as the interest.
Once you’ve decided that you want to go down the route of a consolidation loan then make sure you shop around to get the best deal available to you. To make sure that your monthly outlay is going to be less than your current outgoings, and that you will be paying less interest than on your current debts, calculate the monthly payments, interest and any other charges on your existing bills. Then compare the figure with what you have been offered by the loan provider.
Before you sign any paperwork check the small print in the loan agreement documents and ask the company to break down in detail the costs of the loan to make sure there are no nasty hidden extras that don’t become apparent until after you’re tied in.