If youve got a really unmanageable amount of credit card debt, you might be considering a consolidation loan. A consolidation loan is a loan that you can use to pay off all your debts, meaning that you can pay them off for less money without having to worry about lots of different bills. Like anything, though, consolidation loans have their advantages and their disadvantages, and it pays to take a careful look at what they offer before you commit yourself.
The Interest Rate.
You should always shop around to get the best interest rate you can if you opt for debt consolidation. This interest rate is almost as important as the one on your mortgage, but much harder to change after youve signed on the dotted line. Dont be fooled by any offers that give you a good rate for a limited time youre going to have this loan for quite a while.
That said, the chances are that any interest rate youre offered on a debt consolidation loan will be significantly lower than the interest rates youre currently paying on credit cards. If you have lots of cards at a high rate and youve had no luck transferring the balances, then debt consolidation could be a very good idea.
The Length of the Loan.
The most dangerous thing about debt consolidation loans is that the ones with lower payments generally last a very long time you could be paying it off for twenty years, or even longer. You should try to find a loan that doesnt last as long, and asks for payments that are as much as you can afford. If you look at what your payments would be and think oh, how cheap!, the chances are youd be signing up to them for a long time to come.
Look Out for More Cards.
One of the most dangerous things about getting a debt consolidation loan is that, since your credit cards have all been paid off, it can be tempting to accept the next few offers you get for new ones. After all, now youre saving all this money, you can afford a few more cards, cant you? Dont fall into this trap! Consolidating your debt and then running up more is an extremely bad idea.
You Could Lose Your Home.
Of course, this is the absolute number one most dangerous thing about debt consolidation. Almost without exception, the loan will be secured on your home. That means that if you start missing payments, the finance company will kick you out, take (repossess) your house, sell it, and pay back the debt with that money.
Theres a whole industry around property developers buying repossessed houses and selling them on for a profit. The chances are that youll come out of it with nowhere near enough money left to buy even the smallest home, and nowhere to live. Just imagine that. If you do take a debt consolidation loan, you need to read the small print as if your life depended on it (it does), and then be very, very careful. Good luck.
Secured loans make your creditors feel more secure about loaning you money. When someone takes out a secured loan, that simply means there is collateral to back up the money they borrowed. This could be a car, or more commonly, a house. There are pros and cons to getting a secured loan as opposed to a standard loan for debt consolidation.
Home Equity Line of Credit – Perhaps one of the most common secured loans is the home equity line of credit. This loan amount is based on how much equity you have in your home. Once you take out this type of secured loan, your house becomes collateral. The most positive aspect of a secured home equity loan is that the money you borrow is tax deductible. For instance, if you have 5,000 in credit card debt, you can roll that over into a home equity line of credit. The credit card payments are not tax deductible, but the home equity loan is. In contrast, standard debt consolidation loans are not tax deductible.
Interest Rate Advantages – Another advantage of using a secured loan for debt consolidation is the interest rate. For many people, credit cards are the source of their debt problems. Credit cards have enormous interest rates. Since secured loans are “secured” by collateral, they tend to have significantly lower interest rates.
After discussing the pros, it is important to understand the con of using a secured debt consolidation loan. Again, many people use a house or a car to secure these types of loans. If you happen to default on the loan and cannot make payments, your house or car will be in jeopardy. A house is usually the largest asset someone owns. You do not want to put your most valuable asset at risk.
For some people, debt consolidation is the best option for their financial problems. Be sure to carefully weigh the pros and cons before choosing to use a secured loan for your debt consolidation.
This article hopes to give you the knowledge you need, to know that you have a firm grasp on the subject. When your student loans get the best of you and youre wondering how youre ever going to get out from under all that debt, take a look at loan consolidation. It may be the answer to a number of your problems.
Turn to Sallie Mae loan consolidation for a way to pay off your federal student loans, improve your finances, and put a little extra money in your pocket every month. A Sallie Mae loan consolidation replaces your existing multiple student loans with one loan, usually with a dramatically lower interest rate as low as 4.75%. The difference a few percentage points can make in monthly payment amounts can mean the difference between scraping to pay bills and actually having a little extra pocket money.
It is not uncommon for a borrower to get a fixed interest rate that is up to 0.6% lower than their current rates. According to federal regulations, calculating the interest rate on a consolidated loan disbursed on or after July 1, 1994 involves the weighted average of the interest rates of the old school loans you are consolidating under the new one, rounded up to the nearest one-eight of one percent. Fixed interest rates on a consolidated loan cannot exceed 8.25 percent.
Every July 1, the interest rates on federal student loans are subject to change according to the annual fluctuations of short-term federal securities, and with them your monthly payment. One of the benefits of a Sallie Mae loan consolidation is that the interest rate is locked in for the length of the loan. While interest rates may be lower some years, when you are locked into an interest rate at least your payments will be predicable and will not rise in the years when the interest rates do.
A Sallie Mae loan consolidation also offers the opportunity to increase the length of the loan. The longer you have to pay it off, the smaller the monthly payments will be. Remember though, lengthening the life of your loan may mean paying out a larger total amount over time.
Applying on-line for a Sallie Mae loan consolidation is free, there are no fees, and there are no credit checks. A few minutes of your time can get you smaller monthly payments and better credit scores; when your Sallie Mae loan pays off your old student loans, your credit report reflects those paid off debts.
Things happen in life and in a crisis sometimes, those student loan payments dont get made on time, or at all. If you have used up your deferment and forbearance options on current loans, consolidating your debt under one Sallie Mae loan may mean a fresh start and a clean slate. If you are facing a situation where defaulting on one or more of your current loans is a very real possibility, acting now to take advantage of a Sallie Mae loan consolidation may save you a lot of problems and help you out of an overwhelming situation.
If you decide that a Sallie Mae loan consolidation is what you want, there are four options for repayment plans, the Standard Repayment Plan, the Extended Repayment Plan, the Graduated Repayment Plan, and the Income Contingent Repayment Plan.
The Standard Repayment Plan offers fixed monthly payments, but the life of the loan is limited to 10 years. The Extended Repayment Plan also offers fixed monthly payments, but spreads them over 12 to 30 years, depending on the total amount borrowed, which lowers the amount of the monthly payments. The Graduated Repayment Plan also spreads payments over 12 to 30 years, but the monthly payments increase every two years.
The Income Contingent sets a payment plan that is calculated on your annual gross income, family size, and total consolidated loan debt, figured into a period of 25 years to pay it off. A Sallie Mae loan consolidation may be the best option for you, but be sure to explore your options thoroughly to make sure you get the best loan for your situation. Now the next time someone asks you about this topic, you can give a little smile and provide them an informative answer.
When your student loans get the best of you and youre wondering how youre ever going to get out from under all that debt, take a look at loan consolidation. It may be the answer to a number of your problems.
Turn to Sallie Mae loan consolidation for a way to pay off your federal student loans, improve your finances, and put a little extra money in your pocket every month. A Sallie Mae loan consolidation replaces your existing multiple student loans with one loan, usually with a dramatically lower interest rate as low as 4.75%. The difference a few percentage points can make in monthly payment amounts can mean the difference between scraping to pay bills and actually having a little extra pocket money.
It is not uncommon for a borrower to get a fixed interest rate that is up to 0.6% lower than their current rates. According to federal regulations, calculating the interest rate on a consolidated loan disbursed on or after July 1, 1994 involves the weighted average of the interest rates of the old school loans you are consolidating under the new one, rounded up to the nearest one-eight of one percent. Fixed interest rates on a consolidated loan cannot exceed 8.25 percent.
Every July 1, the interest rates on federal student loans are subject to change according to the annual fluctuations of short-term federal securities, and with them your monthly payment. One of the benefits of a Sallie Mae loan consolidation is that the interest rate is locked in for the length of the loan. While interest rates may be lower some years, when you are locked into an interest rate at least your payments will be predicable and will not rise in the years when the interest rates do.
A Sallie Mae loan consolidation also offers the opportunity to increase the length of the loan. The longer you have to pay it off, the smaller the monthly payments will be. Remember though, lengthening the life of your loan may mean paying out a larger total amount over time.
Applying on-line for a Sallie Mae loan consolidation is free, there are no fees, and there are no credit checks. A few minutes of your time can get you smaller monthly payments and better credit scores; when your Sallie Mae loan pays off your old student loans, your credit report reflects those paid off debts.
Things happen in life and in a crisis sometimes, those student loan payments dont get made on time, or at all. If you have used up your deferment and forbearance options on current loans, consolidating your debt under one Sallie Mae loan may mean a fresh start and a clean slate. If you are facing a situation where defaulting on one or more of your current loans is a very real possibility, acting now to take advantage of a Sallie Mae loan consolidation may save you a lot of problems and help you out of an overwhelming situation.
If you decide that a Sallie Mae loan consolidation is what you want, there are four options for repayment plans, the Standard Repayment Plan, the Extended Repayment Plan, the Graduated Repayment Plan, and the Income Contingent Repayment Plan.
The Standard Repayment Plan offers fixed monthly payments, but the life of the loan is limited to 10 years. The Extended Repayment Plan also offers fixed monthly payments, but spreads them over 12 to 30 years, depending on the total amount borrowed, which lowers the amount of the monthly payments. The Graduated Repayment Plan also spreads payments over 12 to 30 years, but the monthly payments increase every two years.
The Income Contingent sets a payment plan that is calculated on your annual gross income, family size, and total consolidated loan debt, figured into a period of 25 years to pay it off.
A Sallie Mae loan consolidation may be the best option for you, but be sure to explore your options thoroughly to make sure you get the best loan for your situation.