Getting a personal loan for debt consolidation may seem like a daunting task. Even the thought of looking for a personal loan for debt consolidation can feel overwhelming, because you’re not even sure where to start.
First of all, it’s important to remember that you’re not alone – there are many people out there in similar bad credit situations. A debt consolidation loan could be the answer to helping you to manage your debt. While many debt consolidation loans work off of things like taking out a home equity loan or a second mortgage, for some people that’s not an option. If for some reason you can’t go that route, getting personal loans for debt consolidation is probably your best bet.
However, personal loans can be difficult to get for many people looking to consolidate their debts for one main reason – being in debt and looking to consolidate normally means that the applicant has bad credit. Many of these personal loans are only open to good credit applicants. There are many personal loans for bad credit – but you will normally find that these are just payday loans in disguise – the interest rates that they charge would put you in even more debt and the repayment terms are normally short.
How do personal loans work?
Personal loans, or payday loans, operate on the principle that you need a short-term personal loan, whatever the reason might be. Personal loans, or bad credit loans, assume that you need cash quickly and that you need an unsecured loan, or a loan without using any sort of property as collateral. Personal loans also tend to have a fixed term or length of time in which you need to pay the money back.
While personal loans can be very helpful, they also do have some disadvantages:
- Since personal loans are generally unsecured, the interest rates for bad credit personal loans tend to be higher.
- Unlike the interest on a mortgage or a home equity loan, there are no tax benefits for personal loans.
However, for many people anything other than a personal loan isn’t an option for debt relief. Some people don’t own their home, or maybe they have bad credit and don’t qualify for a home equity loan. Or maybe you just need the personal loan for debt consolidation faster than the bank could get it to you. Advantages of personal loans for debt consolidation include the following:
- Personal loans can be more flexible, so if you want a shorter one or a longer one, a fixed interest rate or a revolving line of credit, you can usually find a personal loan that will fit your wants and needs.
- A personal loan can be done completely online – this lets you get money transferred instantly to your bank account.
- You don’t need to own a home to get a personal loan.
- Even though the initial interest rate of your credit card might be lower than the interest of your personal loan, those interest rates usually only last the first few months that you have the card. After that, usually the interest rate of a personal loan will be lower.
Many people tend to think that secured loans are safer and a better alternative to personal loans, or they think personal loans for debt consolidation are just for people with bad credit or bad credit loans debt. However, one of the biggest concerns about debt consolidation loans is that people are trading their unsecured loans in for secured loans. While these secured loans have a lower interest rate, they also tend to have a much longer life span, making the amount of debt bigger even though it might seem smaller.
There are many companies that specialize in personal loans for debt consolidation, whether you want to go somewhere close by or you just want to find a debt consolidation company online. An advantage to applying for a personal loan online is that you can shop around to find the best rates before deciding on which lender to go with. Online businesses should always provide you with information on how to contact them with any questions or concerns that you might have as well.
Secured Personal Loans
If you are a homeowner, and provided that you have a decent size of equity in your home that covers your debt, you can apply for a secured personal loan. This can be a viable option for many looking to become debt free but does have disadvantages. If you go down this route be warned that your home is now at risk if you fail to meet the repayments. As you are already in debt and have financial troubles, this may not be the wisest decision.
Unsecured Personal Loans
Personal Loans for Debt Consolidation
Given that you are currently in debt, this is the most popular option for most people. This personal loan will basically become your debt consolidation loan.
Before applying for your personal loan, you need to do some preparation. Get all of your unsecured debts that you want to consolidate and tally up the total. This will be your loan amount – do not add any on for personal reasons, eg a vacation, new car, shopping etc. this isn’t what yo are trying to achieve, you are trying to clear your debts.
When you have this total, search online for personal loan companies and check reviews and feedback on trusted sites. Look for news reports of these companies and make sure that they are reputable.
Next stage is to actually apply for the loan. Be careful before you accept any offer that you have properly searched the market, many accept the first proposal only to find out a few days later that they have a cheaper offer from elsewhere.
How Do Personal loans For Debt Consolidation Work?
If you are considering personal loans for debt consolidation, you first get all of your loan information out and start organizing.
Before you are able to find out if personal loans for debt consolidation are the best solution for you and your situation, you need to figure out the different monthly payments that you’re currently making, how long those payments are going to last, and so forth. This is going to involve plenty of math, so you should find a loan calculator online to help you calculate the correct amounts.
Once you have all of the amounts figured out, you can then start getting quotes for personal loans for debt consolidation. This will enable you to determine if you can reduce your credit card debt, or the amount of interest that you’re currently paying, through debt consolidation.
While many people turn to debt consolidation because it is easier to make one payment rather than several, you need to also make sure that you’re not increasing your debt. Interest rates can also be higher on bigger loans, so you should take that into account as well. If your total credit card debt is high, you might want to consider consolidating your credit card debt into two loans instead of just one big one.
Many people are tempted to go with personal loans that have a longer time period, so that their monthly payments are shorter. However, this also means that the length of time that you are paying interest is also lengthened, so that in the long run you are paying more than you would by making bigger payments in a shorter amount of time on similar personal loans.
Using a loan calculator can help you to determine what you can reasonably afford to pay each month, based on your current wages. You need to make sure that you’re not trying to pay off too much each month, or you might end up right back where you were before, with just as much if not more personal loans debt.
Getting personal loans for debt consolidation isn’t the solution for everyone, but you won’t know until you check it out. Get a debt consolidation quote today to find out if you can reduce your debt and start managing your financial situation more effectively.