Debt consolidation loans are a great way to consolidate and repay your loans. These loans offer many benefits that you wouldn’t obtain if you kept repaying your current loans with the outstanding loan conditions that you are now facing. The main advantage you obtain on consolidation loans is an interest rate reduction.
Also, you can vary the repayment schedule and extend it get lower payments or shorten it to repay your debt sooner. Say, you were supposed to repay a few loans over the duration of 10 to 15 years. By consolidating the loans with a debt consolidation loan you can shorten the period to 3 to 5 years. Thus reducing the period of time left till you become debt free. If you extend the repayment program to a 30 year schedule, you can get significantly lower payments over this new period.
The main advantage you can get by consolidating is an interest rate reduction which in turn reduces the monthly payments on your loan. If, for example, you have an 18% rate on your credit card debt, then by going for home equity debt consolidation loans with an 8% interest rate, you can bring down the interest rate by a whopping 10 %.
You get also to reduce the number of payments you have to face each month. The consolidation of loans also makes the process of repayment a convenient one. Instead of having to make lots of separate payments to different lenders, only one payment needs to be made after you get a consolidation loan.
Unsecured Loans Are Not The Only Option
Though unsecured consolidation loans are the most popular option for debt consolidation, many people resort to 2nd or 3rd mortgages in order to consolidate their debts. These loans based on equity offer an incredibly cheap source of funds since they are secured loans featuring extremely low interest rates.
Those with bad credit are usually offered variations of home equity loans that even though they feature higher rates than regular equity loans, are still cheaper that unsecured consolidation loans which by the way can not be qualified for by bad credit applicants. Thus, home equity loans for people with bad credit are almost the only option bad credit applicants have for consolidating their debt.
Nevertheless, there are some non traditional lenders offering unsecured bad credit loans that can be used for debt consolidation and offer slightly lower interest rates than credit cards and pay day loans which are usually the source of finance that people with bad credit use and that is usually the cause of their debt accumulation and the cause of bad credit too.
If at all possible, you should go for home equity loans in order to consolidate because they provide the best source of funds. With the aid of equity on your home you can get low interest rates, higher loan amounts and longer repayment programs so you can save money by consolidating while at the same time being able to afford the monthly payments without sacrifices.
Sarah Dinkins is an Expert Loan Consultant at Badcreditfinancialexperts.com where she helps people to repair their credit and to get approved for home loans, unsecured personal loans, student loans, car loans and other types of loans and financial products. If you need more useful articles find them here with more professional advice on the financial field.