Could it be Time to Consider a Debt Consolidation Loan?
Do you find yourself scattered when bill day comes or having to set multiple reminders throughout the month to make sure you make all of your payments on time? It may be time to consider a debt consolidation loan. This can save you money and the headache of having to pay multiple people every month. Ask the experts at BMC Mortgage and Investments if it’s a good option for you.
Who is a Debt Consolidation Loan Right For?
A debt consolidation loan is not something to take lightly. Remember, while you are paying off multiple lenders, you now owe that money to another entity. Consolidating your debt can be a good solution to save money on high interest rate debt. Here are some things to consider if you are thinking about taking on one of these loans.
- Will I qualify for a loan with a low enough rate to save money?
- Will I be able to afford the payments on the loan?
- How am I going to cut back on my future credit spending to make my monthly loan payments?
- What is my plan to pay off the loan?
If you qualify for a low-rate debt consolidation loan and can limit your future credit spending, one of these loans may be a good choice for your situation.
What Kinds of Debt Consolidation Loans Are There?
There are three basic types of debt consolidation loans:
- Secured Loan
- Unsecured Loan
- Line of Credit
A secured loan means that you have borrowed against something that you own. Commonly people will borrow on their home equity; sometimes, you can borrow against a car, jewelry, or other high-value items. Your interest rate will depend on the physical asset that you have to secure the loan, the institution you gain the loan from, and your credit score. The downside of a secured loan is that you could give up your physical assets like your home if you cannot make the payments.
To get an unsecured loan to consolidate your debts, you need to have a good credit score or someone willing to co-sign on your behalf. Unsecured loans will generally have higher interest rates than secured loans. If you choose an unsecured debt consolidation loan, make sure that it will save you money over the loan's life.
Line of Credit
Consolidating your debt onto one line of credit can be a good option to cut back on the number of bills you need to pay each month. Using a line of credit is similar to putting all of your debt onto one credit card; the danger there is that you end up in debt for much longer, only making minimum payments.
Is a Debt Consolidation Loan Right for Me?
If you are seriously considering a debt consolidation loan and have good credit or assets to use as collateral, talk to your BMC Mortgage and Investments Advisor. They have access to more funding sources than your average bank and can provide you with a loan tailored to your specific situation.