Do you have debts that you’d like to finally get rid of? Are the multiple monthly payments pilling up, giving you a headache? Are you taking debt consolidation loans into consideration?
Do you already have a debt consolidation loan and no longer like the terms? Everything you need to know about the perfect debt consolidation plan refinance is here. This article promises to answer all your questions on this matter!
What Debt Consolidation Loans Actually Are?
Multiple loans, maybe even from different lenders, differ when it comes to the amount you need to pay monthly, deadline, interest rate, and so on. All of this can cause an immense amount of stress and confusion. It’s easy to mix them up or miss a payment, but that can stop with the help of debt consolidation loans.
Debt consolidation loans are the type of loans that combine all your existing debts into just one monthly payment. This is a way of simplifying the process of repaying multiple debts. It refers to the act of taking another bigger loan to pay all the smaller ones. It could help you pay your debts faster, and it could even lower the interest rate you pay on each individual loan. Also, it usually has a fixed repayment schedule. This is a simple way of organizing and keeping track of your finances better. But what are some common consolidated loans?
- Personal loans
- Medical bills
- Payday loans
- Credit card balances
Another piece of information that it’s worth knowing is about the two types of debt consolidation loans. It’s crucial to know what kind of loans need collateral, and which ones don’t. Therefore, the loans can be:
- Unsecured loans – This type of loan is not backed by any collateral. Usually, the interest rate is higher in this case. Your financial profile, as well as your credit score, will represent your ‘business card’ in this case.
- Secured loans – This kind of loan requires collateral (home, car, any valuable property). The interest rate is lower, but it’s because an important property is on the line. Lenders are willing to offer larger amounts of money thanks to the collateral.
If you don’t have anything that can work as collateral, or you are not willing to risk any of your assets, then an unsecured loan is not for you. But, if you have something valuable that can be used as collateral, you have to be careful not to lose it. Both have advantages and disadvantages. So, before choosing between unsecured and secured, make sure to carefully weigh the situation and choose the type of loan that favors you the most. It’s in your interest to keep your home or car but also to be able to pay off all your debts.
What is a Debt Consolidation Plan Refinance?
A debt consolidation plan refinance involves taking a loan with the purpose of paying another existing debt consolidation plan. This is done to help achieve better terms. You can better negotiate the terms of the new plan and get a more extended repayment period than previously or a lower monthly payment. If your credit score improves in the meantime, you’ll be able to get a lower interest rate. Things might work your way if your financial situation changes or if there are changes in the market since your last debt consolidation plan.
If you are someone who already has a debt consolidation plan, debt consolidation plan refinance is the way to go. But, if you have multiple debts, you should look into debt consolidation loans. Both options can offer a more stress-free life, depending on your debt situation!
Keep in mind that your eligibility for a debt consolidation plan refinance is greatly influenced by how well you respected the terms of your previous debt consolidation plan. Make your payments on time, and do not violate any terms of your plan.
Eligibility for Debt Consolidation Loans
Depending on your lender, the requirements might differ. Besides the standard documentation, some lenders might ask for additional documents if they believe it’s needed. But what boxes do you need to check to be eligible?
- You need to be over 21
- You need to be employed (either full-time or part-time)
- Employment proof (for people employed for less than 6 months)
- Identity proof (ID, passport)
As you probably already know, if you have a higher credit score, you’ll be eligible for a lower interest rate. Also, your DTI (debt-to-income ratio) will play an important role when it comes to qualifying for this type of loan. If you have a good history when it comes to repaying your debts, it’s going to be a big plus for you because it shows your future lender that you are taking your commitment seriously.
What to Look for When Choosing a Lender?
Researching all the lenders on the market is the first thing to do. However, removing lenders that are not licensed from the list should be the second thing you do. It’s important to work with licensed money lenders, as it is the safest way to go. The third thing you need to do is to look for someone that offers free consultations. A free consultation shows that the lender is actually client-oriented, and you’ll find out if they can offer you a debt consolidation plan that fits your needs.
Choose the lender that offers you the lowest interest rate and the repayment period that is as extended as you need. Then, check their fees (these should be communicated upfront by the lender) and look at their reviews. Last but not least, their work philosophy can say a lot about them. Transparency, versatility, and personalization are just three of the things that they should offer you in exchange for your trust.
Conclusion
If your dream is to be debt-free, with the help of debt consolidation loans or debt consolidation plan refinance, if that’s the case, that can become a reality. Think of the peace of mind you will feel when, instead of multiple payments, it will be just one, and soon, none! Don’t be afraid to make the change that you so desperately need.