A Little About Debt Consolidation Loans

There are many finance companies and other loan companies that make a lot of money from “selling” debt consolidation loans which is a process of refinancing loans and other debt that you may have.

These finance companies will often “sell” their loans on the basis that your weekly repayments are less, but don’t always tell you that they will extended the loan term, they do not tell you about the higher interest rates or the additional fees that you will be charged.

People want to consolidate their debts to help their financial situation and allow them to manage their money better; however you also should ensure that you are not just extending the loan term with higher interest rates and more fees just to reduce the weekly repayments.

The Right Reasons To Consolidate Debt

It is easy to get weighed down with debt and being mortgage brokers we do see a lot of people that are struggling to meet all of their loan payments. People may say that you should never have taken on so much short-term debt, but there are many situations where it has happened and it is no point dwelling too much on the past anyway. We need to deal with the debt that you have now and consider if a debt consolidation loan is the right option.

The first thing that a mortgage broker should do is get a statement of position from you so they can establish exactly what debts you have. Only then they should assess which debts should be consolidated.

This decision to refinance debt is typically based on the interest cost you are paying for each debt, the penalties (if any) for early repayment, the term remaining and the actual repayment amount.

You should refinance IRD debt where possible as the interest and penalties can be extremely tough, but why would you refinance an interest free loan?

There are times when you may refinance an interest free loan; however you would need to consider this carefully in the overall debt restructure to ensure that it is the best thing to do – normally it wouldn’t be.

What If I Have Bad Credit?

As mortgage brokers we get approached a lot by people who have too much debt and want to get a debt consolidation loan, but have bad credit and therefore think that they cannot get a loan.

There are degrees of bad credit;
A few small defaults on your Veda report – we look at what these are and the reason that they happened and generally if we can explain these then the lenders will be okay with them.
Larger defaults and judgements on your Veda report – we will need a better explanation and we may be limited with the choice of lenders; however there are a range of lenders including non-bank mortgage lenders that have options.
Loan or mortgage arrears – any new lender will want an explanation regarding why the loans or mortgage is in arrears, and this could be the very reason that we want to arrange a debt consolidation loan.

Without looking at your personal situation there is no way of knowing if you can consolidate your debts when you have bad credit, but it is certainly worth looking at. A debt consolidation loan might be the best way to tidy up your credit and manage your way back to “good” credit.

Beware Of The Costs Of Debt Consolidation Loans

The costs of debt consolidation loans vary from company to company and depending on your situation and security. An unsecured loan will almost always be more expensive, so it is definitely worth considering using your vehicle or property to secure the loan and therefore reduce the cost of the loan. Also generally you will pay more if you have bad credit and other situations where you fit outside the “ideal profile” set by the lenders.

Debt Consolidation Loan Comparison

It is extremely hard to source the information to do a proper debt consolidation loan comparison as many of the options to you are based on a risk assessment which sets the interest rate that you would be charged.

The costs involved in a debt consolidation loan are normally;

The interest rate – while often it is hard to find out what the interest rate is with debt consolidation loans you should always ask and compare this to what you are currently paying and also with any other options. Sourced from their websites GE Money quote an example of a 5-year loan with an interest rate of 19% and Finance Now quote rates starting from 13.95% – starting from!
Easy Loans (NZ) say they will quote on a case by case basis, Geneva Finance, QuickCash Finance, Instant Finance and Max Loans do not have any mention of rates that we could find.

The fees – a lot of finance companies will charge an establishment fee and some also charge on-going monthly fees and termination and/or early repayment fees.

Insurances – most finance companies will “sell” a payment protection insurance policy with every loan. This is generally a very expensive way to buy insurance and we suggest that you should speak to an insurance adviser rather than take these options.

Our experience shows many of the debt consolidation loans will have interest rates between 20-30% with an establishment fee and they would have also included an expensive payment protection insurance that would not be needed if you already have your own Income Protection Insurance.

Fast Loans Do Not Often Make Sense

The focus of most finance companies that offer debt consolidation loans is the speed of the application process. They advertise “1-hour approvals” and “online applications” and even the names focus on the speed of acceptance with Finance Now, Instant Finance and Easy Loans (NZ) all giving the impression that you can get your debts sorted out with the minimum of fuss.

Maybe speed is not the most important thing to consider!

You might want to consider taking a little more time to ensure that you get the best option which could save you a lot of money over a very short period of time.

Negotiate Repayment Of Existing Debt

Often there can be some savings that you can make when repaying existing debt.

Any debts that have been handed to a collection agency like Baycorp or Veda are often easy to negotiate a discount if full settlement is offered.

IRD debts often include excessive interest charges and penalties and often a discount can be given if you are able to offer full settlement.

Most personal loans and hire purchase agreements included a payment protection insurance cover. You should be able to get a refund on the portion of cover that has not been used due to early repayment.

Talk to your mortgage broker and they can help to ensure that you can access any of these discounts – they can save you a lot of money and may provide a good reason to consolidate debt.

Mortgage Brokers Do Debt Consolidation Loans Too

Mortgage brokers speak to a lot of people who have had situations where cashflow issues and want to consolidate debt.

Most of the time mortgage brokers deal with home owners, or those who are about to buy their first homes; however most mortgage brokers know a lot about debt and are typically the best people to talk to when you want advice on the best options for any given situation.

Most mortgage brokers will be able to show you the true costs of a debt consolidation loan and then it is up to you to weigh up your options. Mortgage Link is one of the best mortgage brokers around and your mortgage adviser knows how to get you the best options for deb t consolidation and show you how to structure your debt to help you pay it off faster.

Before you try the “fast” options, consider if you would be better to take a little more time to meet with a mortgage broker in person and ensure that you get a suitable debt consolidation loan.

Debt Consolidation Loans Can Liberate You From The Burden Of Debts

Online loans have made it easier and convenient for the borrowers to satisfy their needs and desires. Due to human being’s greedy nature and boundless desires impel one to borrow loan from time to time. Thus, debts get build over a period of time and become cumbersome. All these push borrowers into a never-ending vicious debt trap. If you are one of them who are stressed out due to debt burden, debt consolidation loans can be the perfect solution and can bring your life back to the normality.

There are few important things you should know about a debt consolidation loan that will give you better overview about what they are and how they gone help you. Let me first introduce you to debt consolidation loans.

Debt consolidation loan is a perfect debt management tool that aims to take away the debt burden from the borrower’s shoulders. Debt consolidation loans can give you a fresh start making it easier for you to manage all your existing debts thereby ensuring a new outlook towards life. Though, it may sound to be a dream to you but it’s true, it can do wonders for you.

The next question that may arise in your mind is what type of debts can you consolidate with debt consolidation loans. Whatever debt you may owe medical bills, credit card bills, personal loans, bounced cheques, departmental store cards, student loans or any other loan, debt consolidation loans can consolidate all your debts.

Debt consolidation loan aims to consolidate all your debts into one low interest rate loan. They are a perfect option for people who are finding it difficult to meet their monthly repayments with high interest rates. Debts can be easily managed with a debt consolidation loan. The loan provider will negotiate with your existing creditors on your behalf and you will no longer be required to stay accountable to them. Debt consolidation loan gives you freedom from creditor’s untimely harassing calls reminding you about the due loan payments.

With a debt consolidation loan, you will have only one lower payment to make each month instead of multiple payments that will help you in managing your budget efficiently.

Debt consolidations are available in two forms – Secured and Unsecured. Secured debt consolidation loans require a borrower to put a collateral against the loan. Your car, home or any other asset can work as a collateral against the loan. It gives you an opportunity to make use of the equity in your home to consolidate larger amount of debts. Unsecured loans are totally opposite to secured loans. They do not require a borrower to put any security against the loan but accounts for a higher rate of interest in comparison to secured loans.

Benefits of Debt Consolidation loans are: –

o Easily manageable lower repayments – Debt consolidation loan aims to lower the rate of interest and extend the repayment term that will make your monthly payments smaller helping you save your hard earned money.

o Rebuilt your credit score – With a debt consolidation loan, an individual gets an opportunity to rebuilt their credit rating and steer clear of the pitfalls of the bankruptcy or getting into bad debt trap by paying an agreed upon lower monthly payments on time and in full.

o Low rate if interest – A debt consolidation loan can lower the rate of interest you were paying on the loans earlier. A security put against the loan ensures the lender regarding loan repayments.

If you are looking for a debt consolidation loan then there is no better option other than online lenders. You just need to fill in an online loan application form available at the online lender’s website and soon you will find yourself being swamped with a lot many offers. It is then time for you to do a bit of hard work, don’t blindly go for any of the loan deals you are offered. Do a bit of search in the form of collecting loan quotes and then comparing them, a little bit of efforts now will help you grab the best debt consolidation loan deal.

Getting debt free may be dream for you. Debt consolidation can help you in realizing your dream by reducing your debt burden within no time and will secure freedom from debts. Keep your expenses in control to ensure a debt free future otherwise you will fall into the debt trap again.

How To Avoid The Risk & Benefit From Debt Consolidation Loan

Debt issue is a matter for many people. Survey results show that American households are carrying an average of $10,000 debt, mainly on credit cards debt. Paying back multiple debts have long stayed a headache for many debtors, and a debt consolidation loan has been a primary solution of this phenomena. While you can benefit from consolidating your multiple debts with a debt consolidation loan, there are some risks that you need to beware of and avoid yourself from these risks. This article will discusses some of the risks of debt consolidation loan, how to avoid it and how you can benefit from utilizing a debt consolidation loan to restructure your life financially.

The Risk of Debt Consolidation Loan

A debt consolidation loan is just another loan that acts simply as replacement of you multiple debts. It allows you to combine all your debts into single debt and pay off with a new loan.

Many debt consolidation loans lower your monthly payments by extending the loan repayment period but the new loan’s interest rate remains the same with your old interest rate. Hence, if you calculate it carefully, you will end up with paying more in total interest. You can avoid this by carefully select your consolidation loan package that has reasonable low interest rate and a repayment term that enough to lower the monthly payment to your affordability. Don’t take the maximum repayment term as you will end up with paying a lot more total interest.

A debt consolidation loan may causes you trap into more debts, why? A debt consolidation loan clears all your credit card debt and your credit cards are free and back to the maximum limit for uses again. Many debtors have forgot that their debt still remain, just change from credit card debt to a consolidation loan. They are very happy that their credit cards can be used again, the impulse purchases, temptation of spending without remembering that they still have a consolidation loan to be payoff, adding more balances into their credit cards and becomes their new debt when they can’t pay it later.

Hence, you must commit to yourself to get out of debt and have a self discipline to control your expenses while repay your consolidation loan. The best way to avoid new credit card debt is terminating all your credit cards; if you enjoy the convenient of cashless payment, a debit card can serves the same purpose.

Benefits of Debt Consolidation Loan

A debt consolidation loan can help you to have a debt relief from your overwhelming debt issue. If your monthly debt payment has exceeded your financial affordability, a lower interest rate debt consolidation loan with a lightly longer repayment term can help you to lower your month repayment and bring your overdue debt to current status, saving your from additional finance charges.

If you want to get rid of debt, you need to be able to manage it properly; a debt consolidation loan allows you to combine all your debts into one for better debt management while you are working your way out of debt.

There are many cheap debt consolidation loans available due to the market competitive between lenders, you may find a good deal among them; Ask as many lenders as possible to send you their debt consolidation loan’s details and carefully review each and every one of them before you finalize your choice.

Summary

A debt consolidation loan is a good option to get your debt into a control level while working out of it. You must be smart enough to utilize the benefits of debt consolidation loan in helping your to solve your debt problem and avoiding the potential risks of debt consolidation loan that may cause you into deeper debt issue.