A debt consolidation loan is where a Bank, Credit Union or finance company to provide you with the money to pay off outstanding debt and "consolidate" them (bring them all together) on a large loan.Some of the advantages are:
Advantages of Debt Consolidation loans
You have only one monthly payment to worry about
You frequently reinforce with the lower interest rates that save you money
Your debt will be paid in a period of time (usually 2-5 years)
Any costs for this service are usually very low
Debt consolidation loan interest rates
Banks and credit unions often have the best interest rate for the loan debt. Many factors can help youget a better interest rate, including your credit score, your net worth, whether or not you have a relationship with a financial institution and whether or not you can provide good security (collateral)to borrow money. Good security for a debt consolidation loan will usually be a model of car, boat,term (non-RRSP), or a property that can easily be sold or liquidated by the Bank if you do not make payment of the debt.
In the past decade, banks have often included debt consolidation loans interest rates around 7%-12%.Financial companies tend to charge anywhere from 14% for guaranteed loans of over 30% forunsecured loans.
The downside of a Debt Consolidation Loan
They often require security (collateral)
You must have a decent credit score
Higher interest rate than home equity loan (refinance your home)
The interest rate for unsecured debt combination loans may be
They may not help you resolve the problem causing the debt in the first place
While the Bank loan review is rarely appropriate unsecured debt, some are approved from time totime. To qualify for one of these you will usually need to have a high value (the value of your propertyafter you subtract all of your debts) and some very strong credit score or a signer who has a very highnet worth and a strong credit score.
The chances of you getting a Debt Consolidation loan?
If your credit score meets the minimum requirements of the Bank (that is: not too many late paymentsand no major negative notes on your credit report), you earn enough income, the total monthly minimum debt payments is not too high and you can provide some good security for a loan , thenyou can qualify for a loan debt. If you do not fully meet the requirements on your own, you may stillqualify if you can find a good sign.
If paying your monthly minimum debt too high, even after a consolidation loan is a factor in this situation, you have bad credit, or you can't provide some reasonable security for a loan, then aconsolidation loan will probably not work. If this is the situation you are in, then check out some ofthe other options below to see what else might work. However, if you do not qualify for a debt consolidation loan, then is a solution to your situation can be a bit more complicated.
If you need expert advice, contact us to speak with a credit counselor with experience as soon as possible so you can find the proper solutions before it is too late. Speaking with one of the creditcounselors of our nonprofit is absolutely free and confidential. No matter how complicated yoursituation might be, they will give you the information so you can find out a good solution
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