A debt consolidation loan combines all your payments into one. It is important to secure an interest rate for your debt consolidation loan that is lower than your credit card or your car loan in order for the consolidation to save you money. You should meet with a financial consultant to find the best debt consolidation loans for your situation.
Student loans traditionally have low interest rates anyway, but by consolidating them, you'll have only one payment and you may be able to secure a lower interest rate. An important point to remember is that the government only allows you to consolidate your student loans one time. You should wait until the interest rates are rock bottom before you proceed with the consolidation. Once you consolidate, the single payment, lower interest rate, and the new term will mean lower monthly payments and money saved.
Get references. Lenders and mortgage companies work hard to gain accreditation, and many of them strive to maintain a high level of customer satisfaction. Make sure your lender is accredited by a third party, and confirm that they have no blemishes on their record with the Better Business Bureau. Check your state’s consumer affairs bureau to ensure that the lender is accredited.
Compare. Get multiple quotes and compare them. Don’t rush into the first offer you get. Feel free to play lenders off one another before you choose. Ask yourself, Who am I borrowing from? Is it a traditional lender or one who is considered second tier? Is it a large bank or small? Know the terms of the loan: 5, 10, or 30 years? Is there a penalty for paying it off early? What is the interest rate, and is it fixed or variable? Make yourself a loan comparison chart to review all these factors.
Look for fixed rates. Variable interest rates can be dangerous. Think of a credit card that starts with 0% interest to hook you, then creeps up when you stop paying attention. Or an adjustable-rate mortgage (ARM) or home equity loan with manageable payments for a few years then much bigger ones after the rate adjusts. Don’t set yourself up to fail: Look for fixed-rate loans.
At the end of the day, the purpose of this loan is to save you money. Choose the debt consolidation loan that is going to cost the least amount of money in the long term. Look for the lowest interest rate with a reasonable term.
Debt consolidation has grown into an industry because people are tired of making payments to dozens of creditors every month. Similarly, bill consolidation services exist to simplify the headaches of monthly bills. You pay a bill consolidation service one fee, and they take care of everything.
Can you trust a bill consolidation service? They offer guarantees that your bills will be paid on time, but what if they don’t follow through? There are no easy answers to these questions.
You can actually use a bad credit loan to improve your credit. It may seem odd that you can improve your credit by taking on new creditors, but it's true. If you take out a bad credit loan and are consistent in making payments, you will see your FICO score rise. The key is to be diligent in making your payments. Eventually you'll improve your credit. Bad credit loans, although sometimes expensive, can be turned into a benefit if you use them to show your solid repayment habits.
Making payments on time to your mortgage is the best way to improve your credit. If you’re paying higher interest than you’d like on a mortgage right now, but you don’t qualify for a low-interest refinance because of your credit profile, stay the course! Keep making those payments, and your score will improve to the point when you can refinance at a better rate.
Consider what makes you desirable as a borrower—it makes a difference in the amount of a loan and the interest rate you can secure.
Rising home values have offered a lot of debt relief to homeowners across America. Many have refinanced their homes to take out equity, or they have taken out a home equity loan to consolidate their bills. A home equity loan is just as effective for bill consolidation as a debt consolidation loan. Home equity lines of credit are especially helpful because they have very low interest rates and the term of the loan is usually long.
Meet with your mortgage broker about debt consolidation loans or home equity lines or credit, and inquire if there are any programs that cover both. Get more than one quote while you’re out there assessing the options.
Consumer (personal) debt consolidation and business bill consolidation are very different. When a business builds debt and needs to consolidate it, there are more risks for the lender. This adds a level of complication to business debt consolidation that doesn’t exist for personal debt consolidation.
The purpose of a business is to make money. When a business can’t make enough to pay its bills, the banks want to know why before loaning money. Sometimes the reasons are good, like the company’s growth is outpacing revenue for a while, or the company just bought a critical piece of equipment. On the other hand, many businesses with high debt-to-income ratios put up red flags for banks because they suspect poor management or revenue possibilities that aren’t a match for expenses.