Digital News Report – A debt consolidation loan is refinancing several loans into one with new repayment terms and interest rates. Getting a debt consolidation loan is often sought out by people that have multiple credit card balances and sometimes a student loan or two. When you add up all of the minimum monthly payments that each lender wants it may be impossible to come up with the money that is required. By getting a debt consolidation loan, you can give yourself a chance to reduce the monthly payment requirements by either lowering the interest rates or by extending the length of the loan. Credit card interest rates vary greatly, but rates as high as 29 percent interest but is dependent on the state you live in. Chances are pretty good that you can lower your interest rate by refinancing with a debt consolidation loan.
When you shop for a debt consolidation loan lender, you will want to have a list of all of the credit cards and student loans that you have. You will want to itemize that amount you owe to each lender and the monthly payment amount you pay each month. Also right down the APR interest rate that each one is charging. That way you can decide if you are going to benefit by refinancing with a debt consolidation loan.
You also want to know what your credit rating score is when you are shopping around for a debt consolidation loan. Your credit score can cause your interest rate to be lower if you have excellent credit. If you have a bad credit score, you can still find debt consolidation lenders for poor credit, but you will more than likely pay more in interest.
You can get either an unsecured debt consolidation loan or a secured one. This is also depending on your credit rating, and the amount of debt you owe. An unsecured loan is also sometimes called a personal loan. A secured loan is one that you put up real property as collateral, this is often a home or a car in exchange for the loan financing. If you fail to make the payment you can lose your property. An unsecured loan probably will have a higher interest rate because of the risk the lender is taking, while a secured loan can reduce the interest rate because of less risk involved.
Make sure to ask plenty of questions when shopping for a debt consolidation loan. You will also want to read the terms of the loan before signing it and see if there are any prepayment penalties, limits on how much you can pay each month, etc. If you have questions make sure to get help from a professional credit counselor that is government approved. They also can help you along the way to getting out of debt.
By: Victoria Brown