Most of us do not want to find ourselves in a position where our debt is getting out of hand. Fortunately, there are a variety of loans on offer which you can use to consolidate your debt.
The biggest advantage of these loans is that you will only have one payment per month instead of several payments to various creditors. It will give you control over your finances and help you to plan better for the future.
If you opt for consolidation loans, your creditors could freeze charges and interest on your outstanding debt because they know that they will now get a definite and regular payment from you.
If any of your creditors considered legal action, this might convince them to stop. Legal action is the last thing you want because you don’t know how this will affect your credit rating.
Peace of mind and restful nights – that is what you will have if you are not constantly contacted by your creditors. They are, however, not obligated to accept the plan and may still ask for the outstanding money but mostly this is not the case.
Do remember though that a consolidation loan does not mean that the debt is written off, as it is still your debt and will have to be paid in full. Unfortunately, secured debts such as mortgage loans are not covered by debt management plans.
Lending criteria differ from lender to lender, so check and see what the requirements are at the bank or other institution where you are applying for a loan.
Income: The creditor will need to know that you can repay the loan, so you will have to prove that you have a regular and stable income with which to pay the loan.
Payment history: Have you paid your debts in the past on time? Late payments, sometimes only once or twice, can prevent you from qualifying for loans, or you will be given a higher interest rate.
Stability: Do you move around a lot or have you stayed in the same place for at least two years? Do you own a home? This will be seen as a stabilizing factor in your life.
Equity: It is difficult to lend money, especially large sums, to someone with no security or collateral. If you own property and can put that up as collateral, you should not have a problem.
Home ownership: If you own a home and you renege on your payments, the lender can always foreclose on your home and sell it. This way they will get their money back.
Make sure that you can afford the monthly repayments suggested and that you are happy with the terms of the loans suggested. What will happen if you miss a payment?
Keep the following in mind. What will happen if you used your home as collateral and you can’t keep up with the payments? Are there costs involved, e.g. penalties if you want to pay off the loan early?
Put your mind at ease and determine exactly for how long you will be paying and how much you will be paying back in total. Also, make sure if the interest rate is fixed or not.
Tags: credit rating, late payments, past, payments, month
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