3 Tips for Acquiring A Debt Consolidation Loan

If you have a large amount of debt owed to several different people or companies, you may be considering taking out a debt consolidation loan. While this might seem like a quick and easy decision to make, without properly figuring out what you’re doing within a debt consolidation loan, you may just be making your financial problems worse. But with the right amount of homework and planning, you can make debt consolidation work for you and help you get out of debt faster than you may have been able to do on your own. To show you how, here are three tips for acquiring a debt consolidation loan.Acquiring A Debt Consolidation Loan

Debt Consolidation vs. Debt Settlement

When looking for a company to work with regarding debt consolidation, it’s best to do an ample amount of homework into the company and the way in which they handle helping people with their debts. According to Jeanine Skowronski, a contributor to Credit.com, some companies that claim to be debt consolidation companies are really debt settlement companies. This means that rather than simply paying off the loan the company gave you to pay for your debts, you’re paying the company to try and lower your debt with your creditors. In some cases, the money never actually makes it to the creditors, which puts your credit in jeopardy. So before you consolidate your debt, make sure you’ve researched the company you’re considering working with.

 

Have A Plan Of Attack

Without a plan of attack, consolidating your debt likely won’t have the results you want. Although it may seem like a quick fix to be paying only one debt down rather than multiple, without knowing how you plan to pay off this debt and avoid future debt, it could be very easy to fall back into credit trouble. For this reason, Amrita Jayakumar, a contributor to NerdWallet.com, suggests not only planning how you’ll pay off the debt, but also planning how you propose to change your spending habits to keep your amount of debt under control.

Make Sure The Interest Rate Is Right For You

You may have heard the phrase, “If something seems too good to be true, it probably is.” This applies doubly to debt consolidation. Dave Ramsey warns that just because the monthly payment you will be getting with debt consolidation may be lower than what you’re currently paying doesn’t mean you’ll be saving money. The terms of the loan could be extended dramatically or the interest rate could have actually risen. Therefore, before agreeing to debt consolidation loan terms, make sure the life of the loan and the interest rate are right for you.

Debt consolidation can be a great option if you know what you’re getting yourself into. When weighing the pros and cons, consider the information brought up here to help you make the best decision for your financial future.

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