Consolidation loans: Are They Suitable For Debt Relief?

Consolidation loans

Debts can be a great challenge financially, putting you in stressful situations. With the current unstable economy, the last thing you want is a lending company coming after you for money. Consolidation loans are very common nowadays.

We are talking about them on television programmes, radio talk shows, newspapers and the internet. Consolidation companies have also come up with clever ways to lure people to sign up for their products, saying that buying their products is the easiest and the fastest way to get out of debts.

Most of the time, you have no idea what is coming your way until you look at the fine print of the terms and conditions of consolidation companies. The key here is always be alert making any major financial decision that may otherwise get you into more money trouble instead of helping you get out of debt.

bridgepay-foto08-1024x407Getting out of debt is very important if you are to lead a stress-free life. It is also a courageous step in finally deciding to put your finances in order. However, you have to be careful. Consolidation loans can range from bad credit loans, payday consolidation loans to debt settlement loans and many other types. Thus the first thing is to determine of what kind of financial situation you are in. You may look at the following steps:

1. Outlining your financial situation
2. Research consolidation companies
3. Reviewing terms and conditions of consolidation loans

Outlining your financial situation

Even before you take any consolidation action, you must first evaluate the current situation you are in. You must consider the kind of debt you are in and what kind of consolidation loan you may need. Outlining such points becomes a key starting point to looking for a great solution that will eventually put you out of the debt misery.

Getting an expert to help you get around things is advisable. Next, you need to sit down and draw up a solid plan. This will help you focus on how a consolidation plan is going to help you, giving you a clear financial picture and getting you ready to conquer your debt crisis.

At this point, you will want to have all your credentials in order. Consolidation loan companies will request for a lot of details such as your name, occupation, social security number, among others.

It’s always important to have a couple of documents in place before approaching any company. These documents include your income details, could be you weeks income, months or annual income details.

You will also need to show alternative sources of income which you may have, for example, your spouse’s income or details like child support. You may also need to show credit balances and interest rates that you are currently paying and unsecured debts that you may have. All these will help you choose the right type of financial plan that will suit you.

Research consolidation companies

bridgepay-ladyThis involves looking for the companies which you can approach. The key here is giving yourself several options so that you can slowly narrow down to the one that best fits you. Here is a list to guide you through the research process:

1. Research each company carefully. This typically means you have to look at the advantages and disadvantages that a company may have. You have to weigh the pros and cons of the loan they lend you.

2. Loan types: look at the loans each company offers. There are many types of consolidation loans the kind of loan you actually need will depend on your financial situation.

3. Interest rates and other fees in figures. You will have to look at the interest rates and the additional fees of consolidation loans offered by different consolidation companies. It’s all about looking for the loan that fits your lifestyle and your ability to repay comfortably.

Reviewing terms and conditions of consolidation loans

Having only 2 or 3 of the most suitable choices left after your elimination process, you now need to scrutiny more carefully to find the most suitable one for yourself. At this point, you will want to take a closer look at the consolidation loans work, how much you will have pay every month, its additional fees as well as features and benefits of each plan.

You could pose a couple of questions for every company on your final list. These could include:

1. How much are you paying in terms if interest rates on the new consolidation loan?

2. Which day of the month is the repayment due. This is to avoid paying late and incurring late charges.

3 How much are you paying in total; including additional fees, interest rates etc.

4. What are the terms of the loans? They should be very well elaborated and the loan company should be patiently explaining to you in simplified terms. So always ask for clarification.

5. What if you decide to pay off the consolidation loan earlier? Is this going to incur charges?

6. You probably want to ask about who you can speak to should you have any question on the consolidation loan.

7. Advice and assurance about the worry of having your debt catch up with you.

8. You should ask about whether the consolidation loan will have any effect on your credit score. The last thing you want is to have your score fall after taking the loan.

When thinking of taking up a consolidation loan, you will have to ask a lot of questions which may be bothering you. After all, it’s your money and you are solely responsible for your own loan repayment.


Author: Alex Darwin

Alex is a former budget manager turned entrepreneur. He works mainly at home on his credit score advice website and writes a financial blog on the side. He hopes to expand his business into a full online lending company for bad credit as soon as he gets enough investors.