Debt Consolidation Loans: Paying It All With One!

The dream of anyone who is buried in debt is to get rid of all those bills and credit card balances. However, though debt can not magically disappear, you can improve your situation by obtaining a consolidation loan, repaying all your debt and ending up with a single lower monthly payment easily afforded that can save you money and hassles.

The idea is simple, you get a single loan for a fair amount with which you repay all your outstanding debt and obtain all the benefits associated with this procedure. Not only the process is simple but also the requirements needed to get approved for a debt consolidation loan are definitely easy to achieve.

Benefits of Debt Consolidation Loans

Debt consolidation loans can easily reduce the number of payments you have to do each month. Since the money obtained from a debt consolidation loan is used for repaying all your outstanding debt, then, the only debt left is the consolidation loan which implies a single lower monthly payment each month instead of the multiple payments that you had before which combined were surely a lot more expensive.

The interest rate charged for the money you will owe on your consolidation loan will be significantly lower than the overall average rate charged for your credit card balance payments, cash advance payments, unsecured personal loan payments, etc. Thus, the resulting monthly installments will be significantly lower.

In the long run, a lower interest rate reduces the overall interests paid for your debt. Thus, by consolidating, you'll be saving thousands of dollars over the whole life of the loan. If you destine these savings to repaying your debt, you can get debt-free sooner and with less hassles than if you decided to repay your debt as it was.

Requirements And Approval

The approval process for debt consolidation loans is fairly simple. You just need to fill some online forms as most lenders have online sites featuring their financial products. After you submit your application, it will be considered and in a matter of minutes, a response will be sent to you as to whether you've been pre-qualified.

Then, you'll be required to submit some documentation backing up your application statements like copies of your pay checks, tax receipts, etc. With this documentation the final loan review will take place and you'll be contacted as soon as the loan has been approved. The money will be then made available either in cash or by depositing it into your bank account.

However, if you work with a consolidation agency, they'll retain the amount and proceed to cancel all your outstanding debt with it. This is due to the fact that consolidation agencies want to make sure that the money is used for the purpose it was intended to and not for incurring on other expenses.

As to the requirements, you need to have a fair credit and income. Some credit delinquencies can be overlooked but the income requirement is essential. You need to prove that you'll be able to meet the monthly payments on your consolidation loan without sacrifices. Moreover, in most cases, to get a low interest rate on your consolidation loan you'll need to have equity available on your home in order to secure the loan.

Unsecured Lines Of Credit Instead Of Loans!

Unsecured personal loans have become more and more common with the years and banks offer these loans to clients every single day for purchasing computers, furniture, going on vacations, etc. However, very few know that unsecured personal lines of credit are also available and that there are many advantages provided by this kind of loans.

What Unsecured Loans and Lines of Credit Share

As opposed home equity loans and lines of credit, both unsecured loans and lines of credit do not carry collateral. Equity is the difference between the home value and the debts secured with the property. Basically, unless other specific circumstances, if you want to know the amount of equity available on a property you need to subtract the amount of the outstanding mortgage to the market value of the property. There is no need for appraisal provided that the purchase of the property was a recent one.

Since both loans and lines of credit are unsecured, the interest rate charged for them are rather high. The interest rate charged for lines of credit is slightly higher and always variable as opposed to unsecured loan rates that can be fixed. Nevertheless, the interest rate charged by either are significantly lower than the rates charged for credit cards, pay day loans, cash advance loans, etc.

Also, the loan amount you can request has no particular limit but is lower than that of home equity loans and lines of credit which equals the amount of equity available. However, most lenders have some restrictions on this matter and the amount of money you can request combined with the home mortgage cannot exceed 85% of the home value. Besides, though home equity lines of credit have an amount limit, there is not really a fixed amount you actually request. Thus, with an unsecured loan or line of credit you can get a fairly good amount too.

Line Of Credit Advantages

The main advantage lines of credit provide is flexibility. With a line of credit you get a revolving amount that only charges interests when you withdraw money from it. Other than that, only a small fee is charged every month to keep the money available whenever you need it.

If you need a certain amount, you don't need to request it, you just withdraw it from your account or issue a check against your account and the money is always available. You can request as much money as you want and as many times as you need as long as you respect the amount limit that is fixed at the time of loan approval.

Once the money is withdrawn, you can keep using your account as long as you have credit left. Repayment is simple, at certain date you just need to repay the interests and you can also repay any capital that you want. The only minimum that you need to respect are the interests (just like some credit cards).

Once you repay certain portion of the capital, the amount is available for you again whenever you need to use it. When the loan is due, there are two options: Either you need to repay the whole amount or the line of credit is transformed into a loan with fixed monthly payments for a longer period of time. There is also the possibility of renewing the line of credit provided you get approved by the lender again.