A debt consolidation loan can be a useful way to combine your debts and save money if you are paying off high-interest rate debt. By consolidating your debts into a loan with a lower interest rate, you can get great financial benefits.
Done right, taking out a student debt consolidation loan can be a smart move. It can help you move your way out of debt. In addition, if you use a home equity loan or line of credit, the interest on a debt consolidation loan is usually tax deductible. (Be sure to check with your tax advisor.) Instead of having several credit card balances, you can combine them into one payment. Be careful, though. If you do take out a student debt consolidation loan, and then continue to run up credit card debt, you will be even worse off than you were before.
How Debt Consolidators Can Help YOU Get Out of Debt
As a rule, debt consolidation loans are debt repayment plans. A debt consolidator can combine most types of your unsecured loans and modify them into one new loan, with only one monthly payment for you to make. If you have been paying high-interest credit card, mortgage, auto or school debts, consider what a relief it would be to be to not have to write ten or more checks each month. By securing a home equity loan, or second mortgage, with a lower interest rate, you can begin to pay off your debts, including high interest finance fees. Debt consolidators can help with credit debt, and can smooth over the process for you.
Snowballing to Reduce Your Debts
One way to possibly pay off your debt more quickly is by snowballing.Snowballing often, but not always, applies to revolving credit accounts, such as those associated with credit cards. With this technique, the debts with the smallest owed amounts are paid first. The basic plan is to pay the minimum amount on all of your loans. You then apply any extra dollars to paying off the balance on this first loan. You will need to notify lenders that any extra payments are to be applied to reduce the principal of the loan. After the first debt is repaid, apply the dollar amount of that minimum payment, interest charges and any extra money to pay down the next bill in line. The idea behind snowballing is that as you pay off your smaller bills, you will have increasingly more funds with which to pay larger bills—much as a snowball gains in size and momentum as it rolls down a hill. You will, however, need to determine that you have the funds to pay at least the minimum payment on all of your bills. Although this approach is somewhat theoretical, it can and does work. It also offers the positive psychological benefit to steadily pay off your debts.
Applying for a Debt Consolidation Loan
- When you apply for a home consolidation loan, your house or condominium will be appraised to determine its current market value. Your credit file will also be examined
- Your student debt consolidation lender will request a title report on your property to see if there are any liens or encumbrances against your home
- When your loan is approved, the proceeds of the new loan will be used to pay off your original mortgage as well as any liens that have been identified in the title report. You will then receive any proceeds to use how you see fit.
Debt Relief at Last!
When you decide to consolidate your monthly bills, your various debts are combined into just one loan with just one payment. Think how much peace of mind this could give you and how much time you could save by writing just one check a month! In addition, if you opt for a consolidation loan that has a lower interest rate than what you are presently paying, you may be able to pay your loans off more quickly while spending less on interest. If this sounds like a dream come true, please fill out the form on the bottom of this page to speak with a member of our professional student debt consolidation staff. You will be happy that you took the time to secure you and your family’s financial future.