Debt Consolidation Personal Loans

Finding yourself in debt is not a position anyone relishes. Debt consolidation personal loans are often the best option to help you get out of debt, but it’s important to avoid the pitfalls of these loans. If you employ three simple strategies when evaluating these personal loans, you save a good bit of stress and potentially save your credit rating.

Strategy 1: Be realistic about your debt

Debt consolidation personal loans do not eliminate your debt. Instead, these loans put it all into a neat little package so you only must view one credit statement each month. In a perfect world, your consolidation loan comes at a lower interest rate than your previous credit accounts.

A mistake some borrowers make is assuming they can breathe easy once they consolidate debt. This is not always the case. Debt consolidation personal loans bring everything together, so if you had difficultly remembering when all the various payments were due, you no longer have that problem. On the other hand, the total amount of debt is no different. Even with a lower monthly payment, you must remain diligent about your repayment efforts to eradicate your debt forever.

Strategy 2: Avoid the easy way out

When you’re in deep debt, you get offers for debt consolidation personal loans frequently. Some of these offers may talk about wiping out your debt for pennies on the dollar. Yes, this is possible, but it is not a consolidation loan. Rather, it’s a debt settlement program.

Debt settlement programs differ from debt consolidation personal loans by the way they deal with your creditors. A consolidation lender makes a loan and disburses the funds to pay off your other credit balances. A settlement program offers your creditors an amount well below your current balance. If they accept, they may report a charge off for a portion of the debt on your credit report. If your goal is restoring good credit, the easy way isn’t always the best way.

Strategy 3: Ignore minimum payments

Debt consolidation personal loans come with set payments for you to make each month. Although you must always pay at least this amount, you are typically free to send in additional money to repay the loan early. Always review your household budget to see if you have extra funds. If so, consider sending it along with your consolidation payment. The only way to truly eliminate your debt is to pay off your consolidation loan.

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