Debt consolidation is often misunderstood by many people. The first reason is that it is complicated and has a lot of nuances with numerous moving parts. However, this is not true. Understanding loan consolidation is easy. It is taking one large debt to repay all your smaller loans. People assume that is a complex process but it is not. The second misconception is that people are misinformed and they do not have the right information about the loan. The industry is grappling with a wide array of companies claiming to give lenders the best rates. The main concept of loan consolidation is that we help borrowers access to credit facilities that they would not be able to access in the conventional lending systems. To make it easier for you to understand, we are going to cover all the aspects of debt consolidation.
How Does Debt Consolidation Work?
There are various forms of relief that are available in the market and they do not necessarily qualify as credit consolidation. It is important for you to understand how credit card consolidation works. Combining your advance is a concept where a borrower merges all his or her loans into a single financial obligation. This is easier to manage because you can monitor one loan and it is easier than keeping up several loans with different rates and deadlines. Consolidating means that you will have to worry only a single credit and this is an attractive way to manage and get out of financial woes for people who owe different creditors with varied interest rates. In general, borrowers default their loans because they cannot track them or their interest rates are so high such that they cannot manage to repay them on time. There are many forms of loan merging and you should understand all of them before choosing one.
When Do You Need Credit Consolidation?
Combining your debts is one way of getting out of debt. However, this is not for everyone. How will you know that this is the right time to combine your loans? The answer is simple. Combining your debts will make sense if you have several debts from different creditors and you are looking for a way to clear your debts. Other types of money facilities such as student loans might take some time to combine but you should understand the reason why you want to combine your debt. This kind of loan combination is suitable if you have credit card debt. If you have several credit cards and want to merge the credit on these cards, then this could be the right option for you. Credit card debt is one of the most forms of credits available in the market. If you are not careful on how you spend your credit card finances, then you might end up in a cycle of debt.
Advantages Of Debt Consolidation
Even in situations where you owe money to several creditors, merging your loans may or may not be the right idea for you. It is imperative that you take the time to consider the pros and the cons of the financial direction you want to take. Some of the benefits of merging your debt include:
- Savings – combining your credit may help you save a lot of money in the long run. In the short term, you can benefit because you will be paying a smaller amount each month and in the long term you would have paid less compared to the total amount of the loan.
- Simplicity and hassle free – Combining your debts means that you have peace of mind by tracking a single debt, unlike having to keep up with several loans which can be quite difficult to follow. Moreover, you will not have your creditors calling or emailing you because you would have transferred that responsibility to your lender.
- Helps you overcome debt – When you consolidate your loans into a single payment, it will make it easy for you to repay all your existing debt. This is a feature that you should not underestimate because it could determine your financial future. When you are juggling numerous debts, it can feel like you are not progressing. However, when you combine your credits, any payment is a step towards a credit-free life.
Disadvantages of loan consolidation
Depending on how you react to changes in your finances, combining your finances can be either advantageous or disadvantageous. There are a few disadvantages of consolidating your debt. These include:
- Difficult to access – This could be challenging to people with poor credit history. However, this is not the case with us because we connect borrowers, even those with low credit score to lenders who will finance their loans. Lenders in our network do not consider a less than stellar credit score as an impediment to access money lending facilities. However, it is important that you meet all the criteria set forth by your lender.
- Consolidating your debt is not a solution but a means to an end. This is true if you have poor planning and do not have a long-term financial plan. Combining the debt will help you clear your loans but it is not a solution to long-term financial woes. You should know what got you into this debt in the first place. Once you know the mistakes you did in the past, you can budget and plan for a better future.
What Is The Difference Between Secured And Unsecured Loan?
Credit consolidation comes in two varieties – secured and unsecured loan. In secured loans, the lender will check your creditworthiness and you will be required to provide a certainty of payment by putting down collateral or asset. Perhaps in this category, many people will fail to access this kind of credit facility because of poor credit score. Your poor financial picture may scare your lender. Secured credit is commonly offered by conventional lending institutions such as banks and other financial facilities. On the other hand, unsecured loans refer to money that the lender advances without any collateral.
Will Debt Consolidation Work?
It is not a guarantee that when you merge debt you will be in a good financial position. If you do not have a sound financial plan even after we help you combine your credits, you may fall into the same trap again. The most crucial aspect to understand is that combining loans will work if you are ready to change your spending habits and begin saving. Once you have managed your loans, the next thing to understand is how to avoid getting into this cycle again. If you can budget and avoid spending on unnecessary items, then you have a good chance of becoming financially stable and debt free. You can combine your loans and get credit counseling to help you know to manage your finances effectively. A credit counselor will guide you on the right way of using your finances to put your financial future in place. Restructuring the current spending and development of a saving plan are some of the aspects of overcoming financial advance.
We are a trusted company who will connect you to lenders in our network. Lenders in our network understand your needs and will help you overcome debt by giving you loans with suitable payment plans.