Posted 21 Oct, 2019 | Finance
What is Debt Consolidation? & How it help us to get rid of debts?Add Answer
Debt consolidation loans are generally unsecured loans. The borrowers take up these loans when they have a lot of debts that have to be cleared. It has the most favorable terms, where the individuals can take one single loan and can clear off multiple small debts at one go. With this, the borrower has to pay the interest for only one debt. This saves them from paying huge interest rates on multiple debts.
There are a number of ways to go about consolidating your debt. Here are some to consider.
1. Consolidation loan: If you are already an existing customer with the bank or the lender then you can get a consolidation loan easily with an even lesser interest rate.
2. Credit card: A credit card can be a savior at times. With a credit card, you can also consolidate the debts by transferring the balances. This might affect the credit score as FICO will take into account the credit utilization of yours.
3. Home equity loan: A loan on the home will give more benefits compared to other loan types. As there is a surety placed with the lender, there are high chances to get large borrowings from the financial firm.
When you troubled with multiple debts with high-interest rates, it is a better option to take the debt consolidation loans. If you have regular income and good credit history, You can avail of the debt consolidation loans with low-interest rates.
You can choose Debt consolidation loans when you are not able to handle multiple loans. By taking up a loan that will have less impact on your finances from the previous loans.
Debt consolidation is very effective on high-interest debt like credit cards. It ought to cut back your monthly payment by lowering the rate of interest on your bills, making it easier to pay off the debt.