Debt consolidation loans are a great way to make your life a little easier, but be careful what type of loan you choose and what type of lender you have. Some loans can add hidden fees that make things more difficult over time and prevent you from paying your loans off early. Do your research and you will be able to find reasonable loan options that are both affordable and easy to manage.
Student Loan Debt Consolidation
Having more than one student loan, especially if they are different types of loans, can make it difficult to stay ahead of your payments. Consolidating all of your student loans into one is beneficial, but you will lose the option for deferment and the lower than average interest rate. The right loan will allow you to pay off your loans in a timely fashion without penalties.
Credit Card Debt
Credit card debt consolidation loans are a great way to save money if you can find the right interest rate. Not only will it allow you to pay down your debt faster, it will free up your credit and help to boost your credit score over time. The key is not using your credit cards again until the debt consolidation loan is paid off.
Home Equity Loans
Home equity loans are a great way to take care of credit card and student loan debts. A home equity loan will also work well if you are looking for a way to finance home repairs or renovations. This is also a good way to go if you have multiple car loans with higher than average interest rates. The equity you have in your home holds value. You can use it your advantage if you plan ahead and find the right lender.
Personal Loans
Personal loans are a good way to consolidate small loans. Paying off small credit cards or payday loans with a personal loan eliminates the high-interest rates. It will also allow you to pay them off much quicker than if you continue to make the minimum payments or renewing your payday loans. While personal loans are much shorter in duration than a home equity loan, they are a great way to pay off small debts.
Whatever type of debt consolidation loan you choose, it’s important that you plan ahead. Only borrow enough to consolidate your debt. Once you have your credit cards or other types of debt paid off, don’t create any more. This gives you a chance to lower your debt to income ratio and boost your credit score. Put some of the money you are saving in the bank and let it build interest for a little while.