subject: Is Debt Consolidation An Option? [print this page] How can you find the best debt consolidation service? You may be facing a mountain of debts, credit card bills, or other loans that are strangling the life out of your monthly budget. But you should never act out of desperation. If you are looking for a debt consolidation loan, you need to use your head, do some research, and apply some clear thinking.You might try a debt consolidation loan. Debt consolidation means taking out one loan to pay off more burdensome loans. Sometimes consumers will obtain a debt consolidation loan and use the money to pay off several other high-interest debts, such as credit cards, personal loans, or other high-interest loans.
Here's the way it works; borrow a sum of money from a bank, and you use that loan to pay off all your outstanding loans. Be sure that the consolidation loan has a lower interest rate than the biggest loans that you're paying off. That should make your monthly loan payments smaller.
But you do have alternatives. Apart from a debt consolidation loan, there are important changes you can make to reduce your overall debt.An initial step is to stop incurring credit card debt. Cut up the credit cards; at least put them out of sight.
Getting a debt consolidation loan isn't a panacea. Often the person who needs the debt consolidation loan is in the worst position to get it. And getting a new loan can be very difficult and expensive. Debt consolidation loans often have "points," (a point is one percent of the loan), fees, title insurance, etc. The cost of the loan alone can be prohibitive.An advantage to debt consolidation loans is that you only have one loan payment to make. This will make budgeting much simpler and reduce tension. One of the problems of large debt obligations is managing all the payments that have to be made throughout the month.
A way to make use of a debt consolidation loan is to use the reduction in monthly payments to pay off your debt more quickly. When you borrow at a reduced rate of interest and repay the loan over a longer period of time, you likely will find that you have extra money every month. You need to be very careful here. Be sure to use that extra money to make advance payments on your debt consolidation loan. Then you will actually be digging your way out of debt. When you apply for the loan, make sure you are allowed to make extra payments on the principal.Consolidation loans have several benefits: most important, the new loan has a lower interest rate compared to the other loans.
