With the financial markets having basically collapsed and with personal credit tighter than it has been for years, thinking about a debt consolidation loan seems like sheer lunacy to some. After all, wasn’t it irresponsible consumers and greedy lenders who got us into this mess in the first place?
Of course, that mindset is like taking a broad brush and painting it across every lender and consumer you see. Most certainly, not every consumer is overwhelmed by debt and not ever lender is looking to abuse consumers. You’re certainly not likely to get a bunch of debt consolidation letters or credit card offers in the mail as was common as recently as last summer, but lenders will loan money to people who have maintained good credit all along. In this case the operative word is good so be prepared to have your credit history examined thoroughly before applying for a loan.
Your Doubts About Debt Consolidation
Even with good credit you may have some doubts about obtaining a debt consolidation loan. In the best case scenario, a debt consolidation loan would tackle all of your debt and replace it with just one, low monthly payment. At least that is what the advertisement says it will do!
In actuality, that may not occur. In fact, bad credit could sink your loan application or force you to compromise by accepting a higher interest rate for your consolidated loan. Just in case you don’t realized this, a debt consolidation loan is unsecured debt – just like your credit cards – which means your loan rate will be quite a bit higher than a loan that is secured by your home or other personal property. Thus, your hopes of securing a loan rate of 10, 12 even 15% isn’t likely. Expect 20% or higher instead!
Considering Your Financing Options
If you’re not careful about choosing the right loan you could end up going from several hard to manage debts to one impossible to control debt. Or, in a bid to procure a lower monthly payment you could find your loan dragged out for ten, fifteen even twenty years or longer. However, if you were to stop using your credit cards and began working toward reducing your debt, you might see your bills paid off in four or five years time. That’s a huge difference in repayment time and you would save on interest charges as well.
In the end, the big difficulty for you is changing your conduct. You may need to take on a second job to have the funds on hand to lower your debt or you could get hold of your credit card providers and tell them you are in a desperate financial situation. Yes, just by hinting that you are considering personal bankruptcy you may find your APR as if by magic reduced on the spot. You just don’t know, but it could be worth a try.
Adv. — Have you checked your credit report lately? How about your FICO score? As a consumer, you need to be on top of your credit history, checking for errors and making certain that the information in your consumer credit reports is accurate. Employers, banks, mortgage companies and other lenders base your credibility on a three digit score. Avoid surprises — check your credit report today!