Introduction to Debt Consolidation Loans

April 7, 2012 by  Filed under: Debt 

Due to the ongoing meltdown of the worldwide economy there is a growing list of people that are paying out more than they earn.

Now short term this is not a problem as you can use your credit card or a short term loan to get you by but it often becomes a long term situation where month by month the ‘economic meltdown casualty’ keeps putting expenses on their credit card and only paying off the minimum each month.

This leads into a spiraling fall where the debt mounts up until they can’t even afford to pay the minimum payments. When they get to this stage, they have a limited number of options. Ideally their best course of action is to ask a family member or perhaps a close friend to help them out. But often this is simply not viable so they are left with a debt consolidation loan.

The idea is very simple actually;

1. You report all your loans and credit card amounts to the finance company.

2. They pay off all those loans and all the credit cards in one go.

3. You are then left with a single monthly payment.

The idea is to make the new single monthly payment significantly less than all of your previously combined payments. This is critical in understanding the benefit of these loans.

How do they achieve this?

This is usually achieved by two main factors;

1. The interest rates are generally lower than your previous loans, particularly from the credit card debt.

2. The term of the loan is often taken over a longer period of time.

It is important to be aware of the drawbacks of getting this type of loan though. The main drawback is because the consolidation loan is over such a long period of time the amount you will be paying overall will be significantly higher than your old debt. But unfortunately even with this drawback these types of loans are often the only course of action that people can take.

Would they rather pay more long term or lose their house? It’s a horrible situation to be in but that is the way things are these days.

Things to Check When You Find a Finance Company

It is highly recommend that you check out the finance company before you sign on the dotted line. Most of this is common sense but you can ask for a list of their qualifications. Ask them to give you a detailed breakdown of their fees. Who pays them, perhaps one of the major finance firms?

Ask them if there are any early repayment fees as you do not want to be locked in without a way of getting out of the loan agreement.

To contact a firm who offers services for people wanting to consolidate their debt visit the http://www.finance247.co.nz/loans-nz/debt-consolidation-loans.html page.

This firm also offers finance for cars and you can find more information on their services at this page.

Article Source:
http://EzineArticles.com/?expert=Harry_S_Robson

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!


You must be logged in to post a comment.

Prev Post:
Next Post: