4 Advantages Of A Debt Consolidation Loan
A Debt Consolidation loan is a service which provides a borrower with the opportunity to group together all their outstanding debt into one single monthly repayment.
This process can provide security and peace of mind to people who feel that their existing situation is untenable.
A huge variety of different repayments can be covered within a Debt Consolidation Loan from credit cards and HP agreements through to existing bank loans. And such a move can make sound financial sense for many people who are finding it difficult to meet their existing financial commitments.
Lower Rate of Interest
Short terms loans traditionally have a higher rate of interest than longer term products. By pulling all short term loans into a longer term product the interest rate could reduce significantly, therefore improving the affordability of the regular repayment.
Lower Monthly Repayments
As all repayments are combined into one distinct loan, the administration costs and management fees are simplified and should be drastically reduced. This means the total monthly payment can also fall and it may be possible for more of the payment you make to pay off the core of the debt rather than being eroded costly overheads.
If you find that your total repayments every month are unachievable, then a debt consolidation loan could extend the time in which you have to make your repayments, thereby reducing the actual amount required to repay every month. This would increase the cost of the repayment over the total life of the debt but could make repayment much more affordable on a day to day basis.
Peace of Mind
As only one payment needs to be made each month you will only have to deal with one lender and one point of contact. This will provide you with peace of mind in knowing exactly when the money needs to be available for your regular payment and exactly who to talk to should you have an issue.
There will be no surprises and, as long as the monthly commitment is met, no expensive penalties or ad hoc charges will be applied. By having only one debt you will know exactly when the debt will be paid off and give you a single goal in your mind to work towards.
Reduce The Risk of a Bad Credit Rating
By having only one repayment to focus on, you will know exactly when the repayment needs to be made and how much needs to be paid. This can help stop you falling behind on your monthly payments and therefore reduce the chance of obtaining a poor credit rating which can have a direct impact on your ability to take out further credit in the future.
There are three main ways to consolidate a debt. If you have a mortgage, then many lenders will allow you to increase the value of your repayments to incorporate your outstanding debt. If you are not a home owner or have no mortgage, then a secured or unsecured loan can be sourced from a loan comparison site such as LoanRater to provide you with a highly efficient and competitive solution to your debt crisis.
Written by LoanRater, your number one source for comparing loans online.