What is a debt consolidation loan?

What is a debt consolidation loan?

How can a debt consolidation loan remove your credit card debt? A Debt Consolidation loan is a personal loan that lets you consolidate all your debts into a single payment. For instance, if you have four credit cards, you may be able to eliminate your credit card debt by acquiring a debt consolidation loan to settle the credit cards, so that you only have one fee each month, instead of four.

“Debt consolidation: Loosely defined, it's the act of combining several loans or debts — usually credit card debt — into one low payment. This can offer two big economic advantages: Lower interest rates and greater simplicity. Both are goals to work toward, and both are decidedly achievable.” – eloans.com

The subsequent sections discusses the Pros and Cons of acquiring a debt consolidation loan, and it will clarify the criteria you need to meet in order to be eligible for a debt consolidation loan.

The Pros of a Debt Consolidation loan are:
1. Your debt consolidation loan might have a lower interest rate than the rate you are paying on credit cards, so the loan should decrease your interest payments and help you abolish your credit card debt, ultimately.
2. Lower interest rates and extended terms a debt consolidation may offer, will enable you to reduce your total monthly payments.
3. You will be able to replace several payments each month with only one, which should make your monthly budgeting much easier.
4. A debt consolidation loan will possibly have a lower interest rate than the rate you are paying on credit cards, therefore the loan ought to reduce your interest payments and help you purge your credit card debt – sooner or later

Am I eligible for a Debt Consolidation loan? To be eligible for a Debt Consolidation loan you need to meet the following requirements:
1. The bank will demand a copy of your monthly budget to establish if you can meet your loan down-payments.
2. You need to be working, or have some other source of income that allows you to repay the loan.
3. Banks will determine your ability to service a debt, based on your income. Therefore you need to have your most recent pay-cheques and the previous year's tax return in order to apply for a debt consolidation loan.
4. In order to meet the prerequisites set up by the lending institution for debt consolidation loan, you possibly will need a co-signor or collateral - such as a house or a car.

Where do I begin?Firstly, start with some research. For instance, there are websites that offer debt consolidation loans information. It is in your best interest to amass as much info on debt consolidation loans as possible to conclude whether or not you qualify for a loan.

To determine if you qualify for a Debt Consolidation loan, contact your banker or financing company, or some other lending establishment. Furthermore, there are a number of lenders that specialize in dealing with people in financial distress, especially with bad credit. In the case that a debt consolidation loan is beyond your reach, don't despair - there will be other debt management resolutions available to you – Good luck!