7 Hacks for Debt Consolidation Loans
Having several loans at one time can be very expensive. It can also be confusing, as you may pay different interest rates and have a variety of repayment dates each month.
It can, therefore, be a good idea to consolidate all of your debt onto a single loan. This gives you just one monthly repayment and makes your financial situation a lot simpler.
The following are some of the best ideas for doing this in a way that suits you perfectly.
Choose the amount wisely
How much should you be looking to borrow? Well, you will want to request a loan amount that rolls all of your existing debt up into one package. Don’t leave anything out if you want to get the full benefit of consolidating.
If you can’t get a loan approved for your total current debt, consolidate the items that have the highest interest rate just now. This could mean moving just your credit cards or emergency loans together for the time being. You might be able to move over the rest later on.
Pick a term that works for you
Many people go for a longer-term than they are currently tied to, as this will make their credit consolidation loan more affordable. However, you might like the idea of paying everything off as soon as you can.
You should work out the figures on different terms to see what works best for you. Remember that a longer-term means that you will pay more interest in total. However, it will also mean lower monthly repayments, so it is best for some people but not for everyone.
Look for low-interest rates
Saving money is one of the main advantages of consolidating debt, of course. Ideally, your new loan will be at a lower interest rate than all of the existing debt. This will mean that you are paying back the borrowed amount more effectively.
This should be relatively easy to do if you have high-interest debt such as credit cards and emergency loans. For loans on lower rates, you should look around to try and beat them if you can. Even if you can’t do this, the other benefits of lumping together all your borrowing may still make it worthwhile.
Consider using your home’s equity
It can make sense to use your home equity to obtain a secured loan. This puts your property at risk but will get you a lower interest rate in exchange. It can make a substantial difference to the amount that you need to pay back over the full term.
This is an especially good approach if you currently have large loans outstanding. Secured loans can often be spread out over longer terms without being overly expensive. This will let you restructure your finances well into the future and reduce your immediate concerns too.
Work out the total cost
You need to be sure that your new loan is really worth it. This means looking more in-depth at it than just considering the interest rate. You also need to take into account the total interest figure to be repaid and any charges.
By calculating the total cost, you can be certain that consolidating your loans makes good financial sense. You will also have a clearer view of how much you need to pay back over how long before you are debt-free. This can be the start of a bright financial future for you.
The last thing you want is to have to take out an additional loan shortly after setting up this one. If you need to borrow more money after this consolidation, you will lose some of the benefits of rolling up your borrowing into one loan.
As you plan ahead, you can add in any future expenses to the overall consolidation package. You can do this by looking at the commitments and expenses that are going to become due in the near future.
Choose the right lender
Since this will probably be a fairly large loan over a lengthy period, you want to deal with a lender that you can trust. In this way, you will feel comfortable that taking on this new commitment will improve your life as well as saving you money.
Look at existing reviews as well as the terms & conditions of any lender that you think may offer what you are after. You will want to find a highly professional, reputable firm that lets you carry out this transaction with a minimum of fuss and delay.
The Bottom Line
Consolidating all of your debt onto one loan can make life a lot easier in the future. It is well worth spending a little bit of time in getting it just right. You can then look ahead with a lot more confidence.