What are the advantages of a debt consolidation loan?
A Debt Consolidation Loan can be a way to make the payment of your debts easier to manage. Instead of making several monthly minimum payments in various accounts, this payment strategy involves obtaining a new loan to combine and cover your other loans or debts. Then you can pay all your debts with a monthly payment. It is a great solution to reduce the amount to be paid monthly, although it usually involves lengthening debts and in many cases providing new guarantees such a refinance of your mortgage.
In this way, you can convert all the monthly payments in a single payment lower than the sum of all the monthly payments that you currently have, what you do is to group the debts into one.
It is necessary to be the owner of some property that has sufficient equity even if mortgaged in order to carry out the debt consolidation.
When paying out other debts as long as the interest rate of mortgages is lower than that of the credit cards, car loans, personal loans etc. you can save a lot in repayments. This can mean that the only monthly payment that would have to be paid after reunification is also lower than the sum of everything that was paid before and may increase your credit score.
Loans to consolidate debts are normally granted to pay the following debts:
- Credit card debts
- Medical debts
- Credit Card debts
- Personal loans
- Loans for students
- Unpaid Defaults
You have to be clear about some aspects before signing a loan for debt consolidation:
Loan interest: Normally the interest on the loan will be lower than the credit card. If the interest is high the loan repayments must be less than the sum of all the payments separately.