What is the Smartest Way to Consolidate Debt?
Debt consolidation is a method where people apply for a new loan to pay-off their old debts or other unsecured liabilities. Multiple debts are consolidated into a single, larger piece of debt, and with more favourable pay-off terms.
Favourable payoff terms include
Lower interest rate,
Lower monthly payment, or
Both lower interest rate & monthly payment.
Customers can use this method as a tool to deal with student loan debt, credit card debt, and other liabilities.
How Debt Consolidation Works?
When a customer is stuck amid various debts, they can apply for that one loan. It can consolidate all their debts into a single liability and pays them off. Thereafter, their payments are then directed to the single new debt to clear it off completely. Customers approach well-known banks, credit card companies or unions, financial institutions for a debt consolidation loan. If you have a good payment history with your banks or institutions, then it is the best thing to go for, else you can opt for the best mortgage companies or lenders.
Further, these loans don’t erase the original debt. Instead, they simply transfer the consumer's loan to a different lender or type of loan. For actual debt relief, or for those who don't qualify for loans, it may be best to look into a debt settlement rather than, a debt consolidation loan. Debt settlement is the best plan to opt for in times of debt, rather than going for debt-relief organizations or credit counselling services. These organizations do not make actual loans but try to renegotiate the borrower’s current debts with creditors.
Types of Debt Consolidation
There are two types of debt consolidation loans.
Secured loans are backed by one of the borrower’s assets such as a fixed asset like a land, house or a car. The asset, in turn works as collateral for the loan.
Unsecured loans, on the other hand might show higher interest rates and lower qualifying amounts and which, if not backed by assets can become hardest to obtain. With either type of loan, interest rates are still typically lower than the rates charged on credit cards. And in most cases, the rates are fixed, so they do not vary over the repayment period. There are several ways to bring your debts together, one way is by consolidating them into a single payment.
Advantages and Disadvantages of Consolidation Loans:
Debt resolution is a great tool for people who have multiple debts with high-interest rates or monthly payments—especially for those who owe $10,000 or more.
Single monthly payment.
Lower interest rate.
Faster debt-free options.
Cut down calls or letters from collection agencies.
Boost your credit score.
Get qualified for a tax deduction.
Longer payment schedules lead to more payments.
There might be a negative impact on your credit score.
It might lead to reduced credit
Loss of special provisions such as interest rate discounts and other rebates.
Service fees charged
Gold West Financial is a debt consolidation company with over 15 yrs. of rich experience into rendering outstanding services into finance, loans, and debt resolution to clients nationally.
With our services customers can ensure
No extra fees
Pay Less Interest
No Prepayment Penalties
Gold West Financial – It takes One Step to Clear all your Debt