Considering Debt Consolidation? Read This First
By: Jacky W.
12. Get the right loan
Debt consolidation loans can be secured (backed up by collateral) or unsecured (also often called "personal loans") Secured loans, such as second mortgages, secured lines of credit, or home equity loans, will typically have lower interest rates than unsecured loan. Keep in mind, however, that if you fall behind on a home equity loan, the lender can foreclose on your house. Carefully consider the risk before opting for any secured loan. Unsecured loans are a safer option, because you don't have to risk your house or other assets. If you have good credit, you should be able to get a decent rate (at least compared to credit cards) on an unsecured personal loan.
13. Shop around
Get quotes from several different lenders, and compare the terms and interest rates carefully. Your own bank or credit union is often your best bet, particularly for personal loans, but it's a good idea to shop around. Get quotes in writing so you can compare lenders side-by-side.
Consolidation companies lure you in with their montly payment offers, but you should also consider additional costs like fees and tax implications.
14. Compare the total cost of consolidation to your current situation
Don't just pay attention to the monthly payment. That's how consolidation companies lure you in, but even with the lower payment you may end up paying a whole lot more under the consolidation. Instead, consider how much you'll pay for a consolidation loan, including the interest, upfront and recurring fees, closing costs and points (for secured loans), and any tax implications, over the life of each loan.
Choose the best option and then compare it to the total amount you'll have to pay to pay off your current loans (if you were to not consolidate). If you can realize substantial savings on the total cost of the loan, consolidation is probably a good option.
15. Reject credit insurance
Some lenders will attempt to pressure you into buying credit insurance, either by extolling its virtues, implying that your application will be rejected, or hiding it from you. If a lender does either of the latter two, get out of there and file a complaint with the appropriate authorities (in the U.S., the Federal Trade Commission (FTC) handles complaints, as do many state attorneys general). Credit insurance can add a huge cost to the loan, and it generally offers you very little protection. The lender may make the cost seem small by telling you the monthly price, but don't be fooled.
(Part of this article was derived with permission from 'How to consolidate loans' on wikihow.com)
Have something to add to this article? Email the author!
Ten Diseases That Can't Be Cured
By: Megan C.
Be first to read new articles and subscribe to our bi-weekly news letter.Our mailing list is free, opting out is easy and we don't send spam.
50 Photos Full of Fail
By: David S. Prepare for some massive FAIL.
How To Save Money On Fuel Costs
By: Robert S. There are many ways you can save money on fuel.
Oh No, Same Dress!
By: Vicky S. See who wore the same outfit on the red carpet.
Eight Gadgets That Help You Lose Weight
By: Robert P. Make working out a little more fun by using gadgets.
25 Signs You Haven't Grown Up Yet
By: Matthew C. Have you fallen for the traps of maturity yet?
Do you want to advertise your website, product or service through ReadTheSmiths.com? That's certainly possible!
We work together with a few of the largest ad networks worldwide. Geo-targeted advertising is supported.
If you want us to make you a custom advertising offer, contact us at firstname.lastname@example.org!
If you'd like to share your article with the visitors of ReadTheSmiths.com, we invite you to send us an email with your submission. We'd love to publish it!
You can also write us if you have a suggestion or general feedback. We look forward to hearing from you!
This website is run by professional writers Donna Smith (1965) and Julie Michelle Smith (1979) and their families.
Donna and Julie Michelle write mostly about health, travel and beauty related issues, while their husbands, parents and children write about tech, finance and entertainment.