Debt Consolidation Loan

What is Debt Consolidation Loan?

A Loan taken to Consolidate all Other Existing Debts of a

borrower

Problems with Multiple debts – Different credit terms Different repayment/ installment payment periods Higher interest rates Difficulty in managing number of loans

Ways of Consolidating Debts

Getting a loan approved and settling all other dues using

the amount obtained

Getting the assistance of a Debt Management Agency where one monthly payment is done to the

agency and they manage the individual creditors

Benefits of a Debt Consolidation Loan

Debt management process is made less complex Savings in Interest costs Longer repayment period Lower monthly installment amount

Types of Debt Consolidation Loans

Secured Loans: Given on a Collateral Lower Default risk for the lender Higher Loan amount Lower Interest rates Longer Repayment period Interest cost may be tax-deductible

Unsecured Loans: No requirement for a collateral Higher Default risk for the lender Lower Loan amount Higher Interest rates Shorter Repayment period Interest cost may not be tax-deductible

Obtaining a Debt Consolidation LoanA Debt Consolidation Loan could be obtained through; Banks Finance companies Debt Relief companies Credit Unions Online lenders

Important considerations when obtaining a debt consolidation loan: Amount Repayment period Interest rate Other fees and charges involved Availability of all relevant information Regulation on the lender Customer reviews

Determinants of Debt Consolidation Loan Rates

Credit Score: Credit worthy debtors get favorable credit terms

Collateral: Debtors prepared to provide a collateral get favorable credit terms

Debt Consolidation Loan for Bad Credit

Effects of Bad Credit Low credit score Less accessibility to further borrowings Higher interest rates Unfavorable credit terms

Strategies to obtain favorable terms in Debt Consolidation Loans Giving a collateral Getting assistance of co-signers Seeking help of specialized lenders for bad credit Finding a credit counselor

Deciding to Obtain a Debt Consolidation Loan

Remember! There are alternatives to obtaining a Debt Consolidation Loan. Choose what is right for you!

Do not fall into another debt in the process of attempting to get out of existing debt burden!

Be cautious about scammers!

Disadvantages of Obtaining a Debt Consolidation Loan

Another debt becomes the solution for the previous debts. Due to longer repayment periods of the loan, debtors might

end up paying higher interest in the whole process. In a collateralized loan, debtor bears the risk of losing his

asset in case of delays or non-payment of installments.

Debt Consolidation Loan CalculatorHelps to calculate: new installment amount from

the new loan after consolidating debts and

savings in the process

Calculations can be done by: The customer representative of

the lending institute. By our own using online

calculators taken from lender websites

Credit Card Consolidation What is it? Combining outstanding amounts of multiple credit cards together.

How does it work? Obtain a Balance Transfer Credit Card with 0% or lower interest rate Pay off outstanding dues of existing cards using the new card

Pitfalls: Unless spending pattern is changed, this would become another debt Interest benefit could be only for a limited period Hidden/ Additional charges Authenticity of the issuer

Benefits: Can avoid bad credit image Cost savings from debt settlements during initial months Need to manage only one credit card

Hey Friends,

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