Debt consolidation might turn out to be a seemingly viable option for you when you are reeling under the fear of bankruptcy or are struggling with debts in general. Borrowers struggling with their present volumes of debt can seek to explore the benefits of debt consolidation to wriggle out of trouble. So, why exactly would anyone like to settle for debt consolidation loans? Read on to find out:
A borrower with multiple debts gets to enjoy several benefits if he qualifies for a debt consolidation loan. To start off with, you get a chance to pay off all your smaller debts and are left with a single monthly payment. The rate of interest is lowered and you get a chance to pay off the loans quicker— above all, it’s much easier to keep track of (and consequently pay off) a single loan than several ones. You can seek the help of debt consolidation loans both in case of secured and unsecured loans. However, there might as well be a few consolidation programs which are based exclusively either on secured loans or on unsecured loans. So, make sure that when you are looking for companies offering relevant services, you are checking out whether they are dealing with the loans (secured loans or unsecured loans) you are looking to consolidate, or not.
When you are looking to consolidate a secured loan you can do the same by taking out a second mortgage, refinancing your home or else by getting a home equity line of credit. A 401K loan can be used to place your retirement fund as collateral.
On the other hand, in order to qualify for an unsecured loan you need to furnish decent credit scores. It is believed that it was far easier to qualify for these loans earlier than they are today.
Benefits of a debt consolidation loan
In order to realize the true benefits of debt consolidation you are first required to acquaint yourself with the way it works. Since we have already discussed about the same, we will be coming up with the real benefits of this program.
Consolidations can be treated as major stress busters
Stress is quite common among borrowers with several debts. The constant fear of possible bankruptcy overwhelms them, and as a result stops them from functioning properly in other areas of life. Debt consolidation loans, on the other hand, help you to combine all your debts in to one single payment – and that too at a lower rate of interest. As already mentioned above, it is much easier to keep track of and pay off a single loan than several loans at the same time. As a result, you are much less stressed and are in a better position to focus on other important areas of life.
Get rid of the incessant collection calls
When a borrower gets behind on his payment, the creditor turns to collection agencies to squeeze payments from him (the borrower). These collection agencies might even end up calling you several times a day enquiring of the payments—when you will be able to make all the payments, why you are getting behind your payments etc. These phone calls, needless to mention, can turn out to be quite annoying. Enrolling for a consolidation program would mean that you are getting the help of debt specialists who will be dealing directly with your creditors!