Use Personal Debt Consolidation Loans to Get Back On Track

Personal debt consolidation loans can give you immediate funds to repay a large number of your debts at once. Once you have done this, the consolidation lender is your sole remaining lender. You will begin payments to this lender immediately, or after an agreed upon grace period. Personal consolidation loans can help many individuals get back on track and are the best  solution for many borrowers today.

Process

You will need to contact a debt consolidation company. You will have a choice between a non-profit, or for profit company. Non-profit companies tend to have lower fees. The consolidation lender will review your credit score and income to determine how much you can afford in a new consolidation loan. If this sum is large enough to pay off your debts, you can pursue the loan option. The consolidation lender will make payments to all of your existing lenders, effectively closing your obligation to them. You may have to pay fees associated with early payment, and you will need to pay an origination fee for the new loan. These fees can take a chunk out of your savings, so remain vigilant about the total cost. 

Benefits

There are two main benefits to consolidating. The first is a potential cost savings. If you receive a good rate quote on your new loan, you can reduce the rates on many of your existing loans at once. Further, you can avoid finance penalties that would have been applied if you missed payments on your other loans. A second benefit is the reduced hassle that comes from consolidating your loans into one, single debt. By owing just one lender each month, you can streamline your payment process, reduce administrative fees, and ultimately keep track of your debt in a much more efficient manner.

Eligibility

Not everyone will qualify for consolidation. You must be able to afford payments to the new lender, which means you will need sufficient income. Further, your new lender may determine the cause of your existing debts was your irresponsibility as a borrower. In this case, even a consolidation lender may turn you down for a loan. Consolidation lenders want to make loans to individuals who have a good chance of repaying the debts so they can continue to earn profits and pay their employees. If you do not appear to be a candidate, you will not be offered the chance to participate. 

Example

Perhaps the best example of debt consolidation used in a positive manner is consolidating student loan debts. A student may have to take on numerous debts to cover the cost of attending school beyond tuition loans. These include credit cards, personal loans to pay room and board, and small loans for books or electronics. The student could not pay down these debts with the lack of an income. Now that the student has graduated, he or she has an income, and debt repayment commences. By consolidating the debts, the student will face a much easier process moving forward. 


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