Staying on top of your debts could prove to be pretty challenging particularly when you need to distribute your money between multiple loans, credit cards, or some other debts. You may be thinking of opting for an effective debt consolidation loan for easing your debt repayments. In this context, you must know that an effective debt consolidation loan would mean combining all your existing debts into only one lower interest loan. A debt consolidation loan could be really fruitful when you seem to be having multiple high-interest loans.
An effective combination of multiple debts this way could help in lowering monthly repayment so that you could easily afford the repayments every month. Here are different kinds of loans that could be used for consolidating your debts.
Credit Card Balance Transfers
In the case of credit card balance transfers, you could transfer multiple credit card balances effectively to just one single credit card generally with a relatively lower rate of interest.
The low balance transfer rate of interest is normally purely promotional rate that expires after at least six months. You must be alert and aware of the exact date from when your lower interest rate would be expiring indicating automatically the start of regular interest rate for your remaining balance. If you are thinking of using credit card balance transfer, you should necessarily have a credit card that has the higher credit limit for holding your entire credit card debt.
The drawback related to a balance transfer is that your credit score would be damaged due to excessive debt on a single credit card, however, the credit score would be rebounding as the balance is being paid down. Get in touch with nationaldebtrelief.com for seeking professional debt relief advice.
Home Equity Loans
When you are taking out a loan using your house as the collateral, it is referred to as a home equity loan. Typically, there must be a reasonable amount of home equity and a really good credit score for being eligible for the home equity loan. Even though you would be enjoying lower interest rates, the actual hitch is the fact that from now on, your house would be on the line, as far as, the credit card debt goes. If you are unable to afford the payments and if you are falling back on your monthly payments, you would be facing foreclosure on your house. As such, it is quite risky to consider using a home equity loan.
Personal Loan
You could take out a personal loan for consolidating all your current debts provided your personal loan is big enough for covering all your balances. This is supposed to be an unsecured loan and you need to make fixed payments that too, over a fixed time period. Once your application for the personal loan is approved, you may go ahead and use it for consolidating your debts. The only issue that you could face is that your personal loan may not be approved if you have a poor credit rating. Alternatively, your loan may be approved with a higher rate of interest to compensate for the poor credit score.
Debt Consolidation Loans
Debt consolidation loans are available at credit unions and banks. Debt consolidation loans usually vary so you need to choose with wisdom. Debt consolidation loans must preferably have a relatively lower interest rate as compared to the rates you seem to be paying at present.
Conclusion
Always keep in mind that a debt consolidation loan would not necessarily mean that you would be debt-free forever. You need to realize that you are simply shuffling your debt around, just to make your payments lower and definitely easier. Avoid the temptation of borrowing, assuming that your debts are all gone after taking out the debt consolidation loan. You must lead a disciplined life and avoid borrowing at the drop of a hat.