How Does Personal Loan Help In Debt Consolidation

Everybody has unexpected expenses that come up from time to time; like helping your

son through college or take a vacation that you always dreamed to go on or pay medical bills. To meet such expenses you might be looking for personal loan help. Personal loans come in several varieties with different interest rate and payment options. However, you will have to always remember that whenever you apply for a loan, a credit footprint will be placed on your file and hence it is important to measure how much you really need a personal loan help.

Broadly, personal loans are classified as secured and unsecured loans. Secured loans require collateral and you pay a low rate of interest and a small amount as monthly payment. Secured loans offer flexible repayment terms. In contrast, you dont need to offer your property as a security if you are opting for an unsecured personal loan. The rate of interest is high and the term is short in comparison to secured loans.

If you are taking a loan to pay off your credit card debts, debt consolidation is a better option. Debt consolidation loans are also available as unsecured personal loans, other than the ones most commonly heard of like mortgages or as secured loans. Some benefits mentioned below will allow you to decide better. Unsecured personal loan debt consolidation is often available at rates lower than the interest rate on your credit cards. Secondly, low debt consolidation loans are usually available for a longer term than regular loans. Thirdly, by centralizing your debts at one location you can pay off all or most of your unsecured bills (credit cards, payday loans, medical bills etc) and reduce your stress level as you can pay multiple bills using a single debt consolidation loan and avoid dealing with several creditors. Fourthly, when you pay off your debts with a single debt consolidation loan, it will have a positive impact on your credit score. As such, your credit score will shine and boost your FICO score.

What if you have a bad credit? In such a situation, you may have trouble finding a lender willing to extend you an unsecured personal loan at a reasonable interest rate due to your low credit score. Even if you find one, you may get it at a high rate that costs more than continuing to pay regular debt payments.

In such a situation you may want to opt for a secured debt consolidation loan. This loan is based on secured lending where you merge all your existing personal unsecured loans such as mall membership cards, credit cards, payday loans, outstanding utilities arrears, car loans etc. under a single secured consolidated loan using your house or other high ticket assets. Secured debt consolidation loans provide substantially reduced monthly interest premiums and you can repay the loan principal within a short time and move towards being debt free.

If you are taking personal loans to pay off your debts, it may be best to consider a reputed company withdebt consolidation services to guide you and tailor make a plan according to your financial requirement.

Finally you need to draw a clear picture of the total interest charges, fees and principal payments you will make in a year and measure them with how much payment and fees you will make against the loan option you choose for a year and also consider what will be the final cost by the end of term. It will help to bring your finances on track and as mentioned, also create a positive impression on your credit score. You may even want to be on the look out for a reputed organization that has experienced consultants and the capability to be your one stop resource for saving money.

by: Ask Bill

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