Loans and Debt – A Careful Balance
Balancing you loans and your debt is a tough thing to do and it's very easy to get behind on debt loans. You need to assess your debt situation and really make some changes to move forward. Sometimes the decisions can be tough. You may need to bring in a roommate, or downsize your apartment or condo. You may need to trade in your leased or expensive car for one that is more economical. You may need to substantially change your shopping or dining habits to get a jump on your debt situation. First thing's first though - order a copy of your credit report and put together a list of all your debts and your monthly payments. Spending is like any addiction: once you acknowledge the problem and face it, you are on your way to recovery.
Finding Debt Consolidation Loans
Loans, like credit cards, can get overwhelming if you have many of them. Different interest rates, due dates, amounts and lenders can create situations where you're paying too much money in interest and sometimes you end up missing payments as well. Eliminate the confusion by consolidating your debt into one, lower interest rate loan. One payment, one lender, one interest rate and you are done. The most important thing is to work on changing your spending habits so you can maintain this cleaner debt loan situation.
Borrowing Debt Consolidation Home Equity Loans
Whether you have credit card debt, personal loans, high interest car loans or other debt loans, taking out a home equity loan to pay them all off can be a great solution. It all depends on the interest rate. If you can get the right amount at the right interest rate, a debt consolidation loan out of your home equity can absolutely save you time and money. If you can't get enough equity out to cover your debts, or you can't get an interest rate that is lower than those of your existing loans, consider another option. Make sure you shop around with local banks, mortgage brokers and online to make sure you are paying the lowest closing costs and interest rate possible.
Securing Loans for Debt Consolidation
If you're looking to get a debt consolidation loan, you need to consider what makes you desirable as a borrower, - it will make a difference as to the amount and interest rate you can secure.
- Security - What assets do you have that can secure your debt consolidation loan? Do you have a home? A car? An art collection? Lenders are happy to lend money to people with assets.
- Debt to Income Ratio - How much debt do you have? Usually, if you have more debt than you have income coming in, a lender is less likely to give you a loan, unless it's specifically for debt consolidation.
- Credit - How is your credit score? Do you make payments on time? The better your credit score, the more likely you are to get a debt consolidation loan but depending on the interest rates of your existing debt loans, you may be able to get a debt consolidation loan with a higher rate and it will still help you out.
Fixed Rates for Bad Debt Loans – The Answer
Variable interest is a dangerous thing. If you have a credit card that starts with a 0% interest rate and then creeps up on you, or if you have a 5 year ARM mortgage or home equity loan, then you need to watch your rates closely or you'll quickly get the short end of the stick. Look for fixed rate debt loans at reasonable interest rates because the stability of these payments will help you plan your finances more effectively. Keeping track of multiple variable interest rate loans will give you a major financial headache. When it comes to debt loans, follow the KIS principle - Keep it Simple!
Comparing Debt Consolidation Loans
If you've been shopping around for debt consolidation loans and you've gotten multiple quotes, make sure that you're comparing apples to apples. First - who are you borrowing from? Is it a traditional lender or one who is considered second tier? Is it a larger bank or a smaller one? Second, what are the terms of the loan? Is it a 5 year, 10 year or 30 year loan? How do the monthly payments work? Is there a prepayment penalty? Finally, what is the interest rate? Is it higher or lower than you expected? Is it fixed or variable? When you align all of these things on your loan comparison chart, you should be able to get a good feel as to which one offers the most benefits with the least risk.
Paying Off Debt Consolidation Home Equity Loans Quicker
Don't get stuck with a big home equity line of credit! If you take out home equity to pay off loans, make sure you pay off the loans and don't sink that chunk of change into a boat, a car or something frivolous. There are a few ways to get ahead of the game. One - calculate the savings you are garnering from consolidating your debt and put as much of it as possible towards your debt consolidation loan. By putting extra money towards your home equity line, you are reinvesting in your future and ensuring that you don't get a big disappointment when you sell your home only to have a dismal return on investment. Use your credit cards for emergencies only. Don't buy food, extras and silly things with your credit or with money from your consolidation loan. Finally, mind your interest rates. Spend the least amount of money to have debt as possible.
