Consolidation Loans

What Is Debt Consolidation Loans? This is when a person in debt (a Debtor) simply consolidates (brings together) all their debts into one big loan with one Creditor as opposed to multiple smaller loans with multiple Creditors. What Are The Advantages? The main advantages of consolidating all the debts into one, is that a Debtor: Only has one monthly payment to think abo t. !ormally consolidates all the debts at a lower interest rate compared to all the previo s individ al debts, hence saving money over the longterm. "ill settle the debt in a pre#agreed deadline, which is normally $#% years. "ill pay at a red ced fee, in the event that s ch service providers charge a fee. What Are The Disadvantages? The main disadvantages of consolidating all the debts into one, is that a Debtor: &s ally re' ires sec rity (collateral) s ch as a car or a property. ( st have a decent credit score. "ill be paying higher interest rates compared to a home e' ity loan (refinancing the home). (ay be paying higher interest rates for nsec red debt consolidation loans. (ay not receive the desired help that is re' ired in order to act ally solve the root of the problem.

What Interest Rates Are Typically Applied? Credit &nions and banks normally offer the most competitive interest rates for s ch loans. "hen looking at the past decade alone, s ch loans were typically charged at interest rates of aro nd )* # +$*. Other financial instit tions tend to charge in e,cess of +-* for sec red loans to a staggering ./* for nsec red loans. There are a n mber of overall factors that contrib te towards being given a lower interest rate, s ch as a Debtors credit score, their net worth, whether or not they have an e,isting relationship with that partic lar financial instit tion from where they are applying for the loan and whether or not a Debtor can offer good sec rity (collateral) for a loan. What Are The Chances Of eing !ranted Debt Consolidation Loans? The chances of ' alifying for this type of loan is dependent on a n mber of factors. 0or e,ample, a Debtor is more likely to be granted this loan if: 1 Debtor meets the basic credit score re' irement. This means that the Debtor does not have too many late payments and there are no alarming amo nts of big negative notes on their credit report. 1 Debtor earns eno gh income to be able to settle all the personal and financial commitments.

 1 Debtor2s total monthly minim m debt payment is not too high. 1 Debtor can afford good sec rity for a loan. 3n the event that a Debtor does not meet all the re' irements on their own, it may still be possible to ' alify for s ch a loan if the Debtor finds a good co#signer. The chances of being granted this type of loan will be very slim if: 1 Debtor2s minim m monthly debt payment remains very high, even after a consolidation loan is factored in. 1 Debtor has a bad credit score. 1 Debtor cannot offer acceptable sec rity for a loan.