Debt Consolidation Loan

When you're deep in debt, you probably wish there was a fast, easy way out. But getting out of debt is never a fast process. There are things that can help though, like a debt consolidation loan.

A Faster Way Out

When you're in debt, looking at your credit card statements every month and seeing it go down only a fraction with each payment can be discouraging. And that's if you stop using your credit cards altogether! Why does it take so long? Finance charges and high interest rates. It could take you 20 years (sometimes more) this way! That's why a debt consolidation loan can be your financial savior.

When you get a debt consolidation loan, a debt management company gives you a check to cover the amount it takes to pay off all your creditors. Then you pay them back over a period of five years. You might be wondering how this is possible when if you tried to do it yourself and it would take much longer. For one thing, a debt consolidation loan charges a lower interest rate. Most credit cards charge anywhere from 18-24%, but you can get a debt consolidation loan with an interest rate in the single digits. So that saves you money right there--money that can be used to go towards principal (the amount you actually owe) instead of interest. Then there's the whole issue of finance charges. When you have a debt consolidation loan, you don't have finance charges. At $20 a month or so, every month, and high interest rates, it's no wonder you're not getting anywhere just paying the required monthly minimum! You may not even be using the card, but somehow you're in neutral as far as progress paying it off.

What You Need to Get a Debt Consolidation Loan

To get a debt consolidation loan, you need two things:

1. Good credit
2. Collateral

Just because you have a lot of debt doesn't mean you have bad credit. Now, if you've had a lot of late payments or missed payments, you might have bad credit. There are debt consolidation loans for people with bad credit, but the interest rate is slightly higher. Still, it's not as high as the interest rate on a credit card.

Collateral is a little trickier. If you're in debt, you might not own anything outright. Unless your car is paid for. That would actually work in your favor. If your car is paid for, that could provide enough collateral for you to get a debt consolidation loan. The car just has to be worth as much as the loan. That way, the lender can sell it to get their money back if you default. Harsh words, we know. But it's the truth. And we're here to tell you the truth about debt consolidation loans.

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