Debt Consolidation Loan Is a Smart Solution for Your Debt Woes
Debt consolidation loan is useful for those who have multiple debts. Such loans help people to pay off their existing multiple loans and then worry only about a single loan. But there are more things ones should about a debt consolidation loan.
What Is A Debt Consolidation Loan?
A debt consolidation loan is just like any other type of loan where there is a principal amount that is borrowed and the interest which is returned over and above the principal amount. The amount of debt consolidation depends on the number of loans a person has to pay off. This means that you should add the amount due, including the principal and interest, of all your existing debts such as car loan, home loan, credit card loans, etc, and you will get the amount for which you need to apply for a debt consolidation loan.
The benefit of taking a debt consolidation loan is that you can concentrate on paying just a single loan instead of paying ten different loans every month. It also becomes easier to manage your finances as you can easily set aside a portion of your income each month for a single loan. You will also have to make payments once every month rather than keeping track of payment due for each loan you have undertaken.
When you have taken multiple loans, there might be a month when you have made payments for all your loans bar one due to any unforeseen reason. This can affect your credit ratings making it difficult to seek a fresh loan in the future. A debt consolidation loan prevents you from getting into such a tight spot.
Things to Remember About Debt Consolidation Loans
Debt consolidation loans are offered by creditors for a long duration of time, thus reducing the monthly installments. However, since the duration of the loan is longer, the total amount, which is, principal along with the total interest, will be more. This should be kept in mind while applying for such a loan. Not only should be aware of the total amount you require and the amount you will have paid at the end of the loan period, you must plan your finances accordingly.
Another thing to note is that if you are already running late with your existing loans and have defaulted on making payments, then the interest rates offered to you by creditors on debt consolidation loans will be on the higher side. This is why it is best to seek consolidation loans earlier on lower interest rates.
This post is written by Andres Wright, works in Golden Credit (S) Pte Ltd. He loves to write about Short term loans and various loan services like, personal, debt consolidation loans in Singapore.