How to Find the Right Low-Interest Debt Consolidation Loan
Posted by: Felicitas Tan in FinanceIf you are having difficulty paying your monthly bills on time, a debt consolidation loan can be a godsend that helps you to lower your monthly payment by combining all of your high interest credit card debt into a single loan.
Beware of counselors or “debt management services” that may make promises they cannot keep just to get an application. Some of these services may charge higher interest rates than you are already paying in addition to charging a fee for services.
A loan consolidation company will negotiate with each creditor on an individual basis to obtain lower fixed interest rates and stop other fees from accruing. Once a settlement has been reached there will be a set interest rate on the loan, provided the creditor is paid on time. In the event of default resulting from late payment the creditor retains the right to resume collection proceedings.
The application process for debt consolidation loan services requires all monthly bills and income statements (And that means all of them). The amount of time for processing will depend on the method of application.
Some applications may be completed on a company website, while other companies handle the application process over the phone. It is vitally important to ensure the company is reputable before revealing any of your personal information. Reviews of these programs and companies are available online and by contacting the Better Business Bureau or Chamber of Commerce in the city where the company operates. These will help in the decision in selecting the right company to handle the debts.
Some companies may claim there are “no restrictions” on the loan being offered. Be sure to read the fine print before making a final decision. Some companies may also allow you to borrow more than the debt amount owed - often considerably more than is owed. The additional funds are then combined with the debt amount for the total loan amount.
A word of caution when considering additional loan: The idea is to get rid of the debt and an addition to the loan could exacerbate an already bad situation. The loan consolidation counselor may advise you to take a larger loan than you really need. If you really do not need the extra money then turn it down.
With reputable companies, you will have several plans available to choose from. Working with a loan consolidation counselor and discussing your situation openly and honestly will aid in choosing the right company to handle your debt. Until you agree to their terms and commit to them, remember that they are salespeople trying to win your business.
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