Pros And Cons Of A Debit Consolidation

One may be having a number of loans at a time

One may be having a number of loans at a time. There is a way out to have only a single loan to repay other debts and is called debit consolidation. This debit consolidation is mostly done to have fixed interest rate, lesser rate of interest or for having only a single loan to handle in place of so many loans. Debit consolidation is applicable as a secured loan. You have to mortgage some assets against the loan. The collateral security can be a house or your vehicle. As an alternative, you may get an unsecured loan for debt consolidation from a bank, which will be at a lower rate than that chargeable on credit cards.

People who own a vehicle or a house can get a debit consolidation loan by mortgage of these assets as collateral security to get the secured loan at lesser interest rates. It is easier to repay the loan earlier in such a case as with the same income you have comparatively more funds available to pay the installments because of the lower interest amount. The financial companies' en-cash the opportunity by taking the advantage of the customers by charging higher fees for a debit consolidation loan as the customer literally makes a gain by debt consolidation.

Many times the debit consolidation firms also discount the loans. In case a debtor is going to get bankrupt, the debit consolidator allows buying the loan at a discount. If a debtor is a bit cautious in such a situation, he may search for some consolidator to buy his loan and pass on to him a portion on the discount to save something. A borrower has to be very careful before going for a debt consolidation. As this is against a secured loan and if for any reason the borrower goes bankrupt, he will not be able to repay the loan and may lose his assets.

You should always be alert about the numerous deceitful operators who are habitually prepared to misuse the benefits available to the customers who go for refinancing. In some cases, the situation may be even worst, if the borrower is unable to pay the loan in time, he may lose his house. A debtor may get to such a situation if he is asked to pay the upfront all the dues and chargeable fees to clear his debt consolidation loan.

If you are a customer, you may end up in paying for the charges, as you may not have the choice to find another lender to get a better rate in the short time available with you. This entire notion is called as predatory landing. Fortunately, most of the debit consolidation deals are free from any type of predatory landings. Unlike the UK, in the United States the consolidated borrowings by the students carry the guarantee by the government and, as such, are comparatively safer.

In case of all federal students, the Department of Education or the financial companies handle their purchasing of any existing student loans. The debit consolidation is done depending upon the type of borrowing the debtor is having. The rates applicable to the student loans vary between 4.7 and 8.25 %. The students are permitted to consolidate their debt once with the private financiers under the present consolidation schemes. Next, they should re-consolidate with the Department of Education only.

Even if the borrower is not interested in combining the loans, while re-consolidating the rate of interest applicable will remain same. The federal students' consolidation schemes are generally referred as the refinancing. This term may not seem to be correctly used as the rates of interest are frozen.

by: Allen Jesson

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