Debt Consolidation Loan
Making multiple payments every month to multiple creditors can get overwhelming, and easy to miss due dates. One late payment can turn into multiple late payments, and your debt never seems to go down. A debt consolidation loan seems like a great solution to pay off all your creditors, and only have to make a single monthly payment to your loan provider. However, taking out more debt to pay off existing debt can be more costly in the long run.
Debt consolidation loans are usually offered by banks, creditors, and other financial institutions and hold stricter criteria to qualify. When applying for a debt consolidation loan, the lender will consider your credit score, income, and will require some collateral such as house or car, in case you fail to maintain your payments. If you are struggling with debt already, the chances of qualifying for a loan may prove to be difficult.
If you are considering a debt consolidation loan to help pay off your existing debt, then you are only replacing one form of debt for another. Check out the difference between a debt consolidation loan and a DMP
Debt Consolidation Loans
If you are seeking personal loans or debt consolidation loans, be aware that most of these loans require collateral, meaning that your loan is secured by an asset you own. You will agree to forfeit your asset if you fail to repay the loan. Collateral assets include your home, car, or something of high value, you run the risk of losing them to a lender if you fail to pay back your loan. If you do not have any personal collateral because not everyone owns a house or car, you can still qualify, but your loan will be at a much higher interest rate, potentially putting you deeper into debt then you were before.
Debt Management Plan
One of the key benefits of a debt management plan is the consolidation of unsecured debt. Clients make a single low monthly payment to their DMP provider and that company distributes that payment to their creditors. With the help of a credit counselor, they will be set up an affordable monthly payment plan, and negotiate lower interest rates with your creditors.
Talk to one of our Certified Credit Counselors and get a free financial assessment to help you decide the best debt relief strategy for you and your family.
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