Posted: 1 Jul '20

How You Can Make the Most Out of Your Debt Consolidation Loan

How You Can Make the Most Out of Your Debt Consolidation Loan

If you are drowning in high-interest debt, a debt consolidation loan might be the right thing for you. You don't always need an external company to take care of debt consolidation, nor do you have to be behind on payments to consider a debt consolidation loan. Consolidating your debt before it gets too bad can help you get on the right track without damaging your credit. Contact us to find the right option for you.


What is a Debt Consolidation Loan? 

Generally, a debt consolidation loan is a loan made by a lender to you using your home equity as collateral. The point of obtaining a debt consolidation loan is to take advantage of low-interest rates in comparison to the double-digit interest rate your credit card probably has. When you use your home as collateral for the loan, you will usually qualify for low interest rates. 


When Should I Apply for a Debt Consolidation Loan? 

There is a limited window for most people where a debt consolidation loan is feasible. This window exists t the point where you realize that you have put too much debt on your credit cards and the point at which you have problems paying the minimum payment amounts on your credit cards. 

The window exists, because a lender may not give you better interest rates than you are getting from a credit card company for this type of loan if your credit is poor due to missed payments. For most people, identifying that they have spent too much on their credit cards is tough. If you are questioning if you are carrying too much high-interest debt, sit down and do a budget, including the amount that you put on your card every month. 

If you are continually spending even a little more than you can pay off every month, you could end up having trouble making payments down the road. Take a good, hard look at the things you are spending on and work to cut your costs down. 


You Have the Loan, Now What? 

Once you have the money in your account, pay off your cards and cut them up so that do not rack up a large balance on them again. Do whatever you can to keep yourself from spending too much on them. Once your cards are paid off, you will only owe the lender that you borrowed from one low-interest monthly payment, and your bill-paying life should be much more comfortable. 


Is It Right for You? 

A debt consolidation loan can be beneficial to many folks. Take advantage of the opportunity before things get too bad and look at redefining your personal spending. If you think you could benefit from a debt consolidation loan, contact one of our advisors to discuss the right options for you.