Debt consolidation: is it for me?

Debt consolidation: is it for me?

 

Do your debts prevent you from sleeping and undermine your morale? You do not know how to get out of it and are afraid of losing your name? Know that there are alternatives to bankruptcy to regain your peace of mind. Debt consolidation is one of them. 

The main reasons are given for the use of debt consolidation

The main reasons are given for the use of debt consolidation

There are three major reasons for debtors to opt for debt consolidation. The most common is the difficulty of closing the budget at the end of the month. Also, a reduction in income, for example during a period of unemployment or in case of illness, or irregular income can also encourage a debtor to choose debt consolidation. Finally, a lot of high-interest debt may also be a reason why an indebted person would be tempted to opt for this alternative.

Limit the spots on your credit report

Limit the spots on your credit report

In addition, these three reasons, debt consolidation can be a good way, for an undisciplined debtor who would forget to pay some debts because of the complexity to manage a lot of small monthly payments, to keep control of his finances by making only one payment per month. As a result, one limits the spots to his credit file because the forgotten ones are less frequent.

Access to a consolidation loan

Access to a consolidation loan

There are two ways to access a consolidation loan. The first is to contact a personal loan and the second is to refinance his residential mortgage. Of course, mortgage refinancing is reserved for homeowners whose mortgage debt has equity, that is to say, whose net worth is positive. Positive net worth is defined as the difference between the fair market value (FMV) and the mortgage balance when it is greater than zero dollars. Obviously, the available balance must be sufficient to pay off debts. With respect to the personal loan, you can take out the loan, regardless of whether you are a homeowner or tenant, with a financial institution, a credit company or a private lender, depending on the status of your personal loan. credit file, because it must be specified, you must have good credit to access a consolidation loan.

Various interest rates depending on the chosen lender

Needless to say, the interest rate for a conventional personal loan from a financial institution is lower than that charged by a private lender. Similarly, a mortgage refinance will be much cheaper in interest than a personal loan. It can be said, however, that debt consolidation will always be cheaper than an amalgam of small debts in terms of interest. However, one must remain vigilant if one deals with a private lender since these often require rates that are close to those required by the credit card companies. This means that the debtor will only have one monthly payment to make, but it will take much longer to settle the debts than if he were dealing with a financial institution, given the economy that he will realize on the total amount in interest by opting for a bank loan.

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