Debt consolidation is a part of debt management programs. The procedure involves taking a new loan to pay off the unsecured loans taken previously. Debts from credit cards, medical bills, payday loans and personal loans are combined together in such cases. Thus, you will make only one monthly payment instead of paying back to multiple creditors at the same time. (Information credit: Debt Therapy)
Here are some FAQs about debt consolidation management answered:What does debt consolidation refinancing involve?
Debt consolidation refinancing means that you will take a loan which will cover the amount after combining the loans taken previously. The smaller loans are usually a one-time payoff. Moreover, you will receive a lower interest rate when compared to the original loans’ interest rate.What are the loans that can be consolidated?
You can consolidate all types of unsecured debts like medical bills, student loans, credit cards and house loans.How bad is a debt consolidation loan for credit scores?
Debt consolidation can actually help you improve your credit score if you follow some strict policies. You have to make sure that the payments are made on time. These involve one time monthly payments. So, it should not be too hard to keep track of debt consolidation loans.Secured or unsecured - which is the best for debt consolidation loans?
This depends on the amount you owe. But you need a good credit score for credit card balance transfers. In case of secured loans like home equity loans you need to make the payments on time, or else there is a high chance of losing your property. But you do not need to face this problem in case of unsecured loans. Secured loans have one advantage—the interest rates are remarkably low.How to consolidate debt and pay it off?
The first step is to combine the debts. Then you have to determine how much you can pay off per month and for how long. You should take consolidation loans by considering this fact. The third step is to approach registered lending companies and enquire about their terms and conditions. You can compare options given by these companies and choose the one you are more comfortable with. It would be better if you hire a debt consolidation manager from a registered debt management site.Who qualifies for a debt consolidation loan?
Anyone who has a good credit score can opt for a debt consolidation loan. You can still take a debt consolidation loan if you have a bad score but the interest rate will be slightly higher.Will this increase my expenses?
If you choose wisely and make on time payments, you will actually save more by the end of the month.Do lenders perceive debt consolidation negatively?
It is better to apply for debt consolidation loans than becoming bankrupt. The lender will view this in a positive way if you make steady progress and ensure on-time payments.
The above answers should clear all your doubts regarding debt consolidation.
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