If you’re not familiar with debt consolidation loans, you might already have looked up some information on whether or not they can truly be as good as they are advertised.
While most lenders promoting low interest consolidation loans will tell you that the possibility to save money and make timely payments that you can afford is quite high, there are a few important considerations you also need to keep in mind before applying for these kinds of loans. Find more information here – http://www.toptenreviews.com/money/debt/best-debt-consolidation-companies/.
How to Get Out of the Red Zone
First of all, applying for debt consolidation loans will not help you much unless you make some effort of getting out of financial instability at first. Of course, some might say “what do we need to consolidate our loans for, if we have to do that in the first place anyway”?
The answer, of course, is that most lenders will simply ignore your application if they do a background check and realize that you’ve been getting big screen TV sets on credit after having lost your job.
Getting out of the “red zone” simply implies stopping your usual spending habits as soon as possible after realizing that your financial situation is starting to suffer, and carefully setting up a budget and spending limit, so that you’ll have the chance of covering at least some of your payments on time.
Savings from Debt Consolidation Loans
Of course, regardless of your financial situation, lenders offering consolidation loans are usually understanding. They will be able to provide you with offers that can cut your interest rates in half, and help you manage your monthly payments and pay off your debts more easily.
For example, if you have 2-3 credit cards that you have to pay almost 30% interest on, a principal of $3,000 for each will quickly lead up to about $12,000 with regards to the total sum you will have to pay off. Debt consolidation loans, on the other hand, can be acquired with interest rates below 15%, so that not only will you avoid having to make three different payments per month, but you’ll also save about $2,000 overall.
Of course, the key is finding a lender willing to provide you with a loan available at an interest rate much lower than your existing loans and credit card payments. As a result, any effort of improving your credit, reducing your debts and expenses, and stabilizing your income will play a major role before your loan application goes through.
Important Dos and Don’ts
If you’re planning to get a debt consolidation loan, you might be on the right track already. However, there are a few things you need to be very cautious about:
• First of all, don’t start overspending as soon as you realize that your monthly payments have gone down. Any savings you gain from your loan will then be essentially voided.
• Always get as much information as possible about your credit score and the interest rates on all the past debts you have to pay off.
• Avoid rushing into an offer without getting some insight from debt consolidation experts first.
All these insights are highly important to consider prior to applying to any debt consolidation loans, and you’ll find many of the experts you talk to will advise caution even after you’ve passed your period of financial crisis.