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Consolidated Loan, Consolidation
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Title: Consolidated loan, Debt consolidation
Author: Jakob Jelling
Article:Debt consolidation is a concept that most people are aware ofand often is a good idea.
Basically when consolidating yourbills or loans, you combine the total amount owed and make asingle monthly payment instead of many smaller payments throughout the month. While this is often a good solution to debt problems, there are a few things that need to be consideredfirst.
The first thing to consider is if a consolidated loan is inyour best interest. Regardless of how you end up procuring aconsolidation loan the basic facts are the same, you areborrowing more than you currently owe to get one monthlypayment. Is this convenience worth the extra cost of the feesand interest on a loan for money than you currently owe?
Depending upon your situation there may be several courses ofaction to consider first. Step one is to take a serious look atyou personal budgeting. Do you need to make changes to how youare currently spending your income? If there is too much debt tobe repaid at once can you enter into a payment arrangement withyour creditors to allow you the time that you need to get ahead?
If you are not able to work your way out of your currentsituation then you need to look at other borrowing solutions.The first option should be to examine what possibilities youalready have. Do you have a mortgage?
If you have a mortgage there may be a few options available toyou. First you may be able to increase the amount of yourcurrent mortgage. In order to increase the amount of yourcurrent mortgage you may have to switch lending institutions andbasically re-mortgage your home while other places will simplyadd the extra amount to your current mortgage. The other similaroption you have is to take out a second mortgage on your home.In this case you are borrowing against the equity in your homethat you have already built up.
If you do not have a home but do have good credit then you mayhave other options available to you such as an unsecured loan.
This type of loan will not impede your ability to buy and sell propertysince they will not but a lien on your assets. This may beimportant to you if you are planning on selling your vehicle orother assets in the near future.
Debt consolidation can be a valuable tool if you know what youare doing and how you got to this point. Debt consolidation mayoffer lower interest rates, lower monthly payments and only asingle bill to pay once a month thus making your budgetingeasier.
However, the cost of this convenience can be fairly high. Oftencompanies will charge you for settling a loan earlier thanarranged thus adding to the total amount owed. Generallyconsolidated loans payments are less than what you are currentlypaying. This is because the term is longer than before. Anotherway lenders make money is by offering loan insurance that youmay already have. It always pays to shop around for any productsince the company offering it at the time is usually chargingmore for the convenience of bundling it.
As you can see a consolidated loan can save you money but maynot be the best option available to you.
The key is to shoparound and do your homework. Find out what various companiesoffer, what kind of interest rate you should expect to pay basedupon your credit rating and what alternative options you haveavailable to you.
For example you may be able to borrow fromyour 401K plan and you will not be charged interest on the loanif you make an arrangement to repay the loan with your employer.A 0% interest loan is a much better option than a consolidatedloan.
About the author:Jakob Jelling is the founder of http://www.cashbazar.com. Visithis website for the latest on personal finance, debtelimination, budgeting, credit cards and real estate.
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