Debt Consolidation Loans – When To Consider Them
_If you're drowning in debt, and are staying up late at nights because of it, you've probably seen the ads on late night television about getting out of debt fast. Most of those services are trying to sell consolidation loans.
The basic gist of a consolidation loan is that you're selling your existing debt to a new creditor, who's going to write you a loan covering that debt. The loan will usually be at a lower monthly payment, and very likely will have restrictions on paying it off early.
The times to consider a consolidation loan are if you're having a difficult time making your monthly payments on top of your existing expenditures. Before you get to the point of looking at a consolidation loan to get out of debt, take the time to get a grip on how much you really spend each month. Look for expenses that can be trimmed back. The usual candidates for this are eating out for lunch, or buying a spiffy, high-end coffee every morning.
Other candidates for a budget trim include cutting back on attending movies – instead of going to every movie that comes out, wait until they hit the matinee theaters. Rather than going out with your friends, try inviting them in – rent a movie on NetFlix rather than going out to the theater, or stay in and play card and board games.
Especially in a tight economic period, board games and card games retain their dollar spent per entertainment hour ratio very well.
The next step is to talk to your creditors. Getting out of debt is largely a matter of communication. Most people who get into serious credit trouble do so by failing to keep in touch with the people they owe money to. No matter how bad the situation is, keep in touch. Even if you can't pay them everything you owe, letting them know you're willing and have intent to pay is of great importance.
You can, if you maintain contact, talk your creditors into cutting your payments, which can do many of the same things that a consolidation loan does, but without the hit to your credit rating or the loan origination fees. ALWAYS try to get your credit card companies to cut rates for you if you're falling behind on your bills.
However, if you've already trimmed the fat out of your monthly budget, a consolidation loan may be the best choice possible. Like any financial services product, it pays to take your time to shop around. Always comparison shop – look for things like interest rates, penalties for early payments, and escalator clauses.
Some key things to watch out for when looking at a consolidation loan: What sort of origination or closing fees are there on the loan? Are you sure you understand all the details of the loan? Have you talked to a credit counselor about your options?
The basic gist of a consolidation loan is that you're selling your existing debt to a new creditor, who's going to write you a loan covering that debt. The loan will usually be at a lower monthly payment, and very likely will have restrictions on paying it off early.
The times to consider a consolidation loan are if you're having a difficult time making your monthly payments on top of your existing expenditures. Before you get to the point of looking at a consolidation loan to get out of debt, take the time to get a grip on how much you really spend each month. Look for expenses that can be trimmed back. The usual candidates for this are eating out for lunch, or buying a spiffy, high-end coffee every morning.
Other candidates for a budget trim include cutting back on attending movies – instead of going to every movie that comes out, wait until they hit the matinee theaters. Rather than going out with your friends, try inviting them in – rent a movie on NetFlix rather than going out to the theater, or stay in and play card and board games.
Especially in a tight economic period, board games and card games retain their dollar spent per entertainment hour ratio very well.
The next step is to talk to your creditors. Getting out of debt is largely a matter of communication. Most people who get into serious credit trouble do so by failing to keep in touch with the people they owe money to. No matter how bad the situation is, keep in touch. Even if you can't pay them everything you owe, letting them know you're willing and have intent to pay is of great importance.
You can, if you maintain contact, talk your creditors into cutting your payments, which can do many of the same things that a consolidation loan does, but without the hit to your credit rating or the loan origination fees. ALWAYS try to get your credit card companies to cut rates for you if you're falling behind on your bills.
However, if you've already trimmed the fat out of your monthly budget, a consolidation loan may be the best choice possible. Like any financial services product, it pays to take your time to shop around. Always comparison shop – look for things like interest rates, penalties for early payments, and escalator clauses.
Some key things to watch out for when looking at a consolidation loan: What sort of origination or closing fees are there on the loan? Are you sure you understand all the details of the loan? Have you talked to a credit counselor about your options?