When you have a lot of unsecured debt with an array of creditors, a debt consolidation loan may be the action you need to take. A debt consolidation loan allows you to pay off smaller bills and replace them with one debt with a lower interest rate.
If you go this route, you must look at the different kinds of consolidation loans, as the loan you get will affect everything from the amount repaid each month, the borrowing amounts, how much you’ll pay total in repaying and how long the repayments will last.
Do your research to find the right debt consolidation loan.
What You Should Be Watching For
Interest Rates
One of the most important things to watch for in a debt consolidation loan is the interest rate. This can vary from one lender to the next. The interest rate is often affected by your financial status and credit score. Compare the rates of each loan to ensure you don’t pay more than you need to.
Repayment Terms
You also need to look at repayment terms, which will also vary from one person to the next.
The shorter the terms, the less time to repay the loan. If on a budget, you may choose for a longer repayment term, as you can pay less per month. Bear in mind that you’ll pay more in interest by doing this.
Maximum Borrowing Limits
You also need to consider the maximum borrowing levels with the loans you’re looking at. Some lenders let you borrow more money than other lenders, but there is still a maximum amount. Be sure to check out to see how much you can borrow to pay the debts off you have.
Application Process
Some lenders make it easier to apply for loan consolidation, so avoid lenders that make you fill out a plethora of paperwork and take time to give you a decision. You also need to learn how long it will take for them to give you the money you need to pay off your debts after the debt consolidation loan is approved.
