Lower Interest Loans

Debt Consolidation Loans
(Using Equity) (Credit Cards) (Traditional Debt Loans) (Credit Counseling)

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If you have a number of loans that have high interest rates, or if you have outstanding balances on credit cards and your monthly payments are too high for you to comfortably look after, you may consider getting a debt consolidation loan. The idea is that you take out one large loan to pay off all the smaller ones. You are then left with only one monthly payment instead of several smaller ones. A debt consolidation loan usually means that the amount of the single monthly payment is less than the total amount of the smaller loan payments.

Using Your Equity:

There are a number of ways to consolidate debt. Some people choose to take out a second mortgage or home equity line of credit in order to consolidate debts.

With a home equity loan, you borrow against the value of your home. These loans require you to put up your home as security. There are two types of home equity loans; one is a fixed amount of money for a specific length of time. The other is a 'home equity line of credit' where you can borrow to a pre-approved credit limit, and use the money as you need it. Usually the interest rate is variable on this type of plan. Interest rates on home equity loans are usually good, but the risk is that if you default on the loan, you could lose your home.

Credit Cards:

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If you have several credit cards and the monthly payments are high, you can consolidate the credit card balances by transferring them to one credit card. Because credit card companies don't require collateral, you don't need to put up something like your house as security. Find out which credit card company will give you the best interest rate and ask them to waive the transfer fees (many are happy to do so, just to get your business). If you can't get a good rate from any of the credit card companies that you have now, you may want to shop around for a new card.
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Traditional Debt Consolidation Loans:

If you don't have any security for a debt consolidation loan (such as your home). These types of loans are really an unsecured personal loan. The only security the lender has is your willingness and ability to pay as demonstrated by your employment record and your credit score or payment history. These loans are considered risky by lenders and interest rates are higher. They can be difficult to get if your credit is not very good. ), you can expect to pay a higher rate of interest. The costs of consolidation loans can add up too. In addition to interest on the loans, you may have to pay "points," with one point equal to one percent of the amount you borrow.

If you qualify and find a lender with good interest rates, then a loan of this type is worth your consideration. It's wise to make sure that you calculate the cost of the loan from the beginning to end though, including any upfront or other fees that may be involved.

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Credit Counseling:

If you are in debt and need help, you can turn to a credit counseling agency. These agencies don't actually consolidate debt, but they work out payment plans for your debts that are eligible. You make a monthly payment to the agency and they pay your creditors. You need to be careful in choosing an agency to work with, because if the agency pays your creditors late, you are responsible in the end and your credit rating will be affected.