Consolidating Loans - Discover 8 Ways For Fast Debt Consolidation Loan

By Ryan Seth

Actually, finding a consolidation loans at a lower interest rate is not always easy particularly if you have a lot of debt and if care is not taken you could end up in deeper debt than you imagined.

You will be able to really put an end to those traumatic monthly payments with a fixed payment schedule or one monthly payment as such debt consolidation is a debtor’s dream.

You should have at the back of your mind that lowering your overall costs is your primary goal for consolidating your debt and here are two key things you need to keep to your heart so as to accomplish this:

1.    Get the lowest interest rate possible

2.    Have a plan to pay off your debts in 3 - 5 years.

Below are the 8 secrets to better debt consolidation.


1.    Rapid Repayment

I always recommend that consumers with debt should start by creating one of these plans and many who do so find they don’t even need to consolidate to get out of debt in the next few years.

2.    Credit Counseling

For all your debts, Credit counseling agencies will help work out a payment plan for you usually with low interest and fees because they don’t actually consolidate your debt but will just help you get out of debt. The agency will pay all your creditors and all you are required to do is make one monthly payment to the counseling agency.
Be careful with the credit counseling agency you have decided to work with but if you adhere to the plan you can be out of debt in 3 - 6years. Participating in a counseling program won’t hurt your credit rating. Be sure your counseling agency pays your bills without delay as you will be penalized for any late payment made by the counseling agency on your behalf since you are still responsible to the lender.

3.    Credit Cards
   
Using this method, you are not taking a chance with any valuable you might have because credit card issuers don’t ask for collateral and you are guaranteed of getting a much lower rate than other forms of consolidation loans if you have a good credit rating.

Discuss with your current issuer on the interest rates you will get if you carry-over balances from other cards to theirs and ask for a waiver on the transfer fees if you can get a fixed rate. Also, you can browse for a new card if you can not get a low rate with your current issuer but be very careful as you may hurt your credit rating if you apply for too many credit cards in a short period of time.

Arrange an optimal payment plan once you have opted to consolidate this way so that you can be debt free in 3 - 5years.

4.    Home Equity Loans

This method of debt consolidation helps you borrow against the value of your house minus any other mortgages. Home Equity Line of Credit and Home Equity Loan are the two major types available.
Home Equity Line of Credit is when you are able to borrow again at varying interest rates if you still have money available but you have borrowed to a pre-approved credit limit while Home Equity Loan is a fixed sum of money for a fixed period of time which is usually at a fixed rate.

Many issuers offer no or low closing costs for these loans and if you itemize you can get low payments, attractive rates and interest which is usually tax deductible. The big risk tied to this kind of debt consolidation is that you stand a chance of forfeiting your house in case you are not able to pay.

5.    Cash out Refinance

This is another great way to exploit the equity on your house where you take out money to pay your bills by refinancing your house. You will eliminate high interest costs of debts you pay off if you can refinance at a considerably lower interest rate and even come out with a lower payment than you have right now as a result of low rates.

You can free up money to use toward paying down other high rate debt or building a retirement fund by lowering your monthly payment therefore consider an interest-only loan.

Pay off other bills from the money you have freed up and use the rest to setup an emergency savings fund. Ensure you understand the total cost of refinancing.

6.    Traditional Debt Consolidation Loans

The only collateral you are offering the lender as security is you because debt consolidation loan is an unsecured personal loan. This makes it more expensive and not always easy to get particularly if you have a lot of debt as lenders consider them high-risk loans.

Please consider another method of consolidation if the repayment term is 10-15years and the interest rate is too high but consider this a great way to save money if the interest rate and term are right. Ensure you calculate the total cost of the loan from start to finish.

7.    Debt Settlement

This method is common and popular among consumers who have a lot of debt and won’t or can’t file for bankruptcy. The settlement company takes away your debt burden by dealing directly with your creditors with respect to your overdue bills and all you are required to do is make a monthly payment to them (Settlement Company). Depending on the debt, the negotiation company will settle your balances as your accounts fall further behind usually for 50% of the balance or less including fees. Using this method, you can be out of debt in less than 2years.

Be very careful when selecting a settlement company because if you don’t deal with a reputable one you could lose all the money you have paid monthly and more importantly using this method will affect your credit ratings in the short-term. In spite of the risk involved, this method could be a very good alternative for consumers who can’t shoulder the burden of debt they have now.

8.    Retirement Loans

You can borrow against your pension plans if you have 401(k) or 403(b) plan. Choosing this method is easy as there are no credit check and no income qualifications.

The point to note here is that rather than withdraw from your retirement account early so that you don’t end up paying taxes and a 10% penalty it is better to borrow against it. Another thing is you may have to pay your loan back at once or pay taxes and penalties for an early withdrawal if you lose your job.

While using this method can greatly affect your retirement, so can costly debt payments. Since you are the lender, interest is paid to you as these loans typically offer low interest rates. You have more time to rebuild your retirement account if you are still in your 20’s or 30’s. Although, it could take a while if you are in your 40’s or 50’s to build up your retirement account again but you would have to weigh the cost of borrowing from your retirement account against the cost of paying high interest of the debts over time.

The biggest mistakes people make when it comes to consolidation are not having a plan for paying off the debt after they have consolidated and procrastination. Waiting for the perfect solution to come along almost always means you will end up in deeper debt. You will learn 8 secrets to  pay off your debts and live a debt free life very fast.

As I have stated in this article, knowing the methods to use in debt consolidation loans is not enough but knowing the reputable company to deal with for whichever method above you have chosen is the ultimate. Click here for a list of reputable Consolidation Loans Company you can deal with for excellent interest rate to live a debt free life very fast.