Alternatives to Debt Consolidation

by admin on April 23, 2014

Many borrowers look for different ways to lower their monthly payments and become debt-free faster. Consolidation loans come with longer repayment terms which is why payments are more affordable.

Weighing the Pros and Cons

A secured loan is one option for borrowers, and they are usually offered a lower interest rate and a longer repayment term. Borrowers make one payment instead of having to worry about multiple deadlines and monthly payments. A balance transfer credit card is one option for debtors with high interest cards. Many issuers advertise promotional offers and a low or zero rate on balance transfers. Besides getting rid of debt faster, consolidation is a way to stop penalties, late fees, and collection calls. This is one way to deal with excessive debt and learn how to budget. Borrowers find this solution beneficial because more of their payments go toward the principal. Taxes and fees may apply, depending on the type of loan and the lender.wallet1

Credit unions and banks s payment history and credit score. Most banks offer secured and unsecured loans. Your credit score is based on types of credit used, amounts owned, and more. A history of late payments, delinquencies, foreclosures, and bankruptcies could disqualify you. Your application may be declined if you are considered a risky borrower.

Your earnings and other sources of income are another factor that plays a role. You may want to list income sources such as your salary, bonuses, commissions, cash rebates, and so on. There are alternatives to debt consolidation loans for non homeowners, including personal bankruptcy and credit counseling. Bankruptcy is one option if you are knee-deep in debt, but it depends on the types of loans you have. A formal proposal to your creditors is one alternative whereby payments are distributed to different loan providers.

The Application Process

List your debts, including mortgages, lines of credit, and credit cards. Look at your monthly payments, interest charges, prepayment penalties, penalty interest, etc. Look at your debt load and types of credit used to figure out whether a debt consolidation loan is the best option. Then you can approach different lenders or use the services of a professional. There are different options to consider, including revolving and installment credit. In any case, this is a viable option if you are about to default.

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