Consolidating debt bad or good
I couldn't even count how many times I've spoken with people who want to use consolidation loans to deal with their debt problems. Therefore, a consolidation loan means taking all of your debts and using a loan to combine them into one big debt.
Since these loans are so easy to do, and so easy to find; and since there are so many people out there who seem to think that consolidation loans are a good tool for dealing with debt, let's discuss whether or not you should consider using a consolidation loan to deal with a debt problem. A consolidation loan usually means fewer payments to make each month, since all the individual debts are now one, and a smaller payment.
If you wrap it into a home equity loan, you are offering your home as collateral.
If you don’t pay off the home equity loan a lien will be imposed against your home.
It is true, you can usually lower the interest you are paying on your debts significantly by taking on a consolidation loan; but, that reasoning isn't sufficient to justify the loan. Because the interest rate you are paying on your debt is not likely what's causing the debt problem.
Overspending, having no savings, and buying things you can't afford are. Let's say that you are ,000 in debt not counting your home.
Mistakes To Avoid If you want or need to consolidate, be aware of the following..
Don't use a home equity loans, says Roberta Lee-Driscoll, a certified financial planner in Honolulu; “if someone has five credit card debts and they consolidate it into a home equity line of credit that is a no-no.” That's because credit card debt is considered unsecured debt, meaning – there is no collateral to back it up.
Even if they are members of such organizations, though, be picky. So while the agencies and employees vary, the plans are all structured the same way: Your counselor determines how much it will take to pay your creditors in full in three to five years.While this may be a good idea for some, if you are one of the many that are considering turning to debt consolidate as your way out, there are some things you should know.First off, consolidation works just as it sounds; You take various debts -- such as credit card balances or personal loans -- and combine them into a single loan, which carries an interest rate that is hopefully lower than the average of what you were paying before.What lenders are looking for: Any reputable lender will check your credit history and ask about your income and debt when deciding whether to offer you a loan.
Your credit history directly affects the interest rate you are offered, and so does your ability to repay the loan.Almost all lenders will require you to be 18 or older and a legal U. resident, with a verifiable bank account and not in bankruptcy or foreclosure. Some lenders have no minimum credit score requirements, but that does not mean they don’t check your credit report. You may have seen lenders that offer loans with no credit check at all, but they will charge interest rates of 300% or more, as will a payday lender.