Are You Looking for a Debt Consolidation Loan? 4 Loan Types to Select From!

Simply put, debt consolidation is the process of collating multiple loans into one. Unlike other debit loan types, this process comes with a low rate of interest, which enables the borrowers to submit a single payment on a monthly basis than multiple payments. Usually, people can have access to this loan from the credit unions, banks, and many other financial organizations.


The best advantages of debt consolidation loans


Debt consolidation loans have their unique set of benefits. Other than the low-interest rate and easy single monthly payments, it is also instrumental in generating a favorable credit record if the borrowers pay back the sum adhering to the agreed terms and conditions. Furthermore, the closed-end loan leads to an established payment routine.


Are you in a financial crisis and think that a debt consolidation loan can be a smart way out? If yes, then it is imperative to be aware and well versed with the four principal kinds of debt consolidation processes.


Four Loan Processes of Debt Consolidation


  1. Consolidation done via a debt consolidation company


Statistics and research data reveal that consumer debt is on the rise. There has been an increased emergence of institutions providing financial services to support as many people as possible in the requirement of debt management or relief. Also, of the many services that are offered, debt consolidation is one.


People who opt for this receive practical and valuable suggestions on loan and debt management. The company at times helps by paying off all the creditors. Hence, individuals now have only one chunk payment to clear off. Moreover, since borrowers do not have to deal with the creditors anymore, it is a relief. However, it only applies if they do not acquire any further debts. Securing financial stability is one of the primary reasons why borrowers should opt for this loan process. Pleasantly, it also adds to one’s savings as the repayment cycle comes to an end.


If tracking all monthly payments and dealing with multiple creditors stressing you out, debt consolidation will help you to get organized. So, when you have a single loan repayment every month, you are on guard, and this saves you from all kinds of late payment charges and default penalties. However, if you have a questionable credit rating, your chances of enjoying a low rate of interest is slim. If you want to opt for debt consolidation loans, you can check out names like and make an informed choice.


  1. The home equity line of loan consolidation


Know that debt consolidation loans are unsecured or secured. The Home Equity Line of Equity Loan Consolidation (HELOC) refers to the secured debt consolidation loan. In this loan process, the borrower’s house gets utilized as collateral against the loan. This solution is efficient as people have the chance to procure a loan that approximates almost 80% of the value of their home.


However, there is no set term for it as property value keeps fluctuating in the market. Hence, you cannot control any external financial aspects. When you can obtain the loan against your house, the interest rates will be low. The rates might vary, but it will be low. If you are opting for this loan type, you must know that if you fail to pay off the amount on time, you will lose your home-ownership completely. 


  1. Debt consolidation done via peer to peer lending


It is a relatively new loan consolidation process. This choice enables individuals to shell out money for each other with the assistance of the Peer to Peer (P2P) lending service providers. These companies get you connected with individuals having a considerable capital and who are interested in investing. Investors make their profits through good interest rates that are levied on the debt consolidation loan amount.


Other than a favorable interest rate and ROI, investors also get to feel good by lending a helping hand to the ones in need. If you want a low interest on the loan amount, P2P loans are the better option than any bank or credit institutions.


  1. The act of balance transfer debt consolidation


If you have to repay several credit card debts, then it is a smart idea to shift all the debts to a single card with a zero rate of interest. Balance transfer consolidation is an efficient process to clear off all the negative balances accumulated on your credit cards. Also, you need to back it by a decision of changing your present expenditure habits and lifestyle completely. It will help you repay the debt amount within the stipulated period having a zero-interest rate.


Several companies provide balance transfers on credit card balance amount with a repayment period of 6 to 18 months. You are expected to repay the balance amount successfully during this time. This debt consolidation process is an affordable choice in comparison to other generic modes of repayment. Moreover, the transfer fee that you need to pay off is usually between 2% and 5%, and it does not add to any pressure.


Pointers to keep in mind


Presently, the market is buzzing with multiple choices for debt consolidation loans. That is why it is essential to make a well-informed and wise decision and steer clear of any scam. Be knowledgeable and smart to avert the aggressive sales person who advertises the too good to be true deals. Never sign any contracts with any organization if they ask for any fee for the registration process. Credit counseling is one of the best ways to decide on the debt consolidation loan process. It will enable you to fix a budget amount and stay within your means. 


The 21st-century lifestyle is inundated with expensive choices. There are several reasons for poor financial management. It could range from an erratic lifestyle, irresponsible loan repayment practices to business losses and many more. Debt consolidation loan is the apt choice when you want to clear off all the debts in one single portion with low interest. These four types of loan process will help you select what suits your requirement the best.

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