Getting a debt consolidation loan to consolidate your debt may not be a good idea. The amount of interest you will pay will be higher with a loan. Consolidation loans also do nothing about lowering your debt balance. High balances result in the higher monthly payments you are struggling to pay. Lastly, could you even qualify for a loan if you needed one?
Consolidation Loans Can Come With Hefty Interest Rates
Lenders are going to take advantage of those who are having tough financial times. A personal loan to consolidate your debt could come with an interest rate as high as 20 percent.
This means you will pay at least 20 percent interest on $30,000. Your monthly payment is going to be anywhere from $1,300 to $1,500 with principal and interest.
Your rates are going to be high because of the nature of your loan. Personal loans are generally considered to be unsecured. Unsecured loans tend to charge much more in interest.
Interest rates are also very high because of your poor credit score. Those with good credit would be able to qualify for a loan through their bank with a much lower interest rate.
Organizing Your Finances Is Easier When You Have Less To Pay
Debt negotiation is a much better way to consolidate your debt. You are not taking out a loan when you negotiate with your creditors. What you are doing is negotiating new terms on your loan.
This will generally lower your balance while also lowering the amount of interest you pay. That $30,000 balance can be reduced to $15,000. Your creditors will lower your interest to a level that makes repayment feasible. This could very well mean below 10 percent for most people. This means your monthly payment is now closer to $900 to $1,000 a month.
Another advantage of debt negotiation is a shorter repayment term. Consolidation terms are designed in an effort to have your debt paid off in no more than 48 months. Debt loans may never be paid off if you don’t have a plan to pay it off.
It Takes Great Credit To Get A Good Rate
Your credit score needs to be about 700 just to maybe qualify for a good loan. Home equity loans are almost as hard to get as an original mortgage. You may even need to come up with closing costs.
A $30,000 debt consolidation will generally come with a 4.5 percent interest rate. Your payment will still be about $1,000 a month. However, you also have to come up with as much as $5,000 in closing costs depending on what state you live in. Borrowers in New York could pay as much as double what a borrower in Wyoming would pay.
Negotiating your debt with a debt relief service requires no minimum credit score. A consolidation package can be made that is tailored to your needs. Borrowers can avoid going bankrupt no matter how close to the edge they are. In fact, borrowers who owe more than $10,000 will see an added benefit to debt consolidation.
Settling your debts should be your course of action if you owe $30,000. Debt consolidation loans will do nothing but put your further in debt. You need someone who can oversee your debt payments and guide you through the process. Otherwise, there is no point in consolidating at all. Call today to speak with a representative about your debt consolidation options. Call right now to see how much you can save through debt negotiation.