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You’ve managed to accumulate so much debt, it’s making you crazy. You’re literally lying awake at night worrying how you’re going to make just the minimum payments required by those five or 10 credit cards you’ve been using.
You've been looking for the best debt consolidation loan you can find with no luck because of your bad credit.
You’ve looked at bankruptcy as a possible solution but don’t want to lose some of your assets as you could in a Chapter 7 bankruptcy. You’ve talked with a credit counseling agency but it can’t offer you much in the way of relief – just somewhat lower monthly payments and fewer harassing phone calls. So now you’re thinking about the best debt consolidation loan as a way to escape those night terrors.
The advantages of a debt consolidation loan
The biggest plus of a debt consolidation loan is that it lets you combine all your credit card debts into one lower, more affordable payment that should be easier for you to manage. When you combine all that credit card debt into a single loan, you should have a much lower monthly payment, which could make your life a lot easier and a lot less stressful.
Debt consolidation loans
The biggest difference between your credit card debt and a debt consolidation loan is the difference between unsecured debt and secured debt.
Credit card debt is unsecured, that is if you fail to pay your credit card statements, all a credit card company can do is turn your account over to a collection agency that will then start harassing you for payment. In comparison, a secured loan is secured by something you own and use as collateral for the loan. In most cases, the asset you would use as collateral will your house.
You also need a pretty high credit score to even qualify for a loan to consolidate your debts. Usually you need a 700 FICO and above, more than likely you will need a 740 to 760 to get a low enough rate to make consolidation worthwhile.
The risk of a secured loan
The downside of a loan where you use your house as collateral is that if you can’t make your loan payments, you could lose it. This is because your lender could foreclose on the loan and force you sell your house to pay off your loan.
The best debt consolidation loan
This means that the best debt consolidation loan would be an unsecured loan or one where you don’t have to use your house – or some other valuable asset – as collateral. For example, the online lender, Lending Tree, offers unsecured debt consolidation loans, as does the company Instant Debt Consolidation Loans.
The advantage of an unsecured debt consolidation loan – besides the fact that you don’t have to use your home as collateral – is that you may have fixed monthly payments, just as you would with a secured loan. However, you need to make sure that the interest rate you’re offered is a fixed rate and not a promotional rate. There are credit unions and banks that will try to tempt you to apply for an unsecured debt consolidation loan by offering a special promotional rate that lasts just six or nine months and then leaps into the stratosphere.
Higher interest rate
You may also find that the unsecured loan you’re offered comes with a higher interest rate. This is because a lender that has collateral will feel much better about loaning you money than a lender that has no collateral and is, thus, taking a bigger higher risk.
Seek actual debt reduction instead of a loanThe downside of even the best debt consolidation loans is that you owe the same amount of money as before. On the other hand, there are companies that can negotiate with your credit card companies to actually reduce your debt amount – by 50% or more - and also cut your monthly payments. These companies are usually called either debt settlement or debt relief companies.
One of the best of these is National Debt Relief, a company that is almost always ranked in the top three of debt settlement companies. You can get a free debt analysis and see exactly what we could to do for you, National Debt Relief charges nothing upfront and takes its fee only if it can negotiate a good settlement for you and how great would that be?