Consolidation loans are a popular debt management option, but is it right for you?
Consolidation loans are a great way to manage your debt. If you can get one, it may be a great strategy for you to help you get out of debt.
Using a consolidation loan to manage your personal debts will:
- Consolidate your personal debts into one monthly payment
- Reduce interest charges
- Will not damage your credit rating
I recommend getting a consolidation loan to many people, but it’s not always the way to go as they are often difficult to qualify for.
In order to qualify for a consolidation loan, you:
- Must have an excellent credit rating
- May need to have collateral as it is often required (house equity, car, etc.)
- May need a co-signer
Another issue with consolidation loans is that they aren’t always a complete solution. All personal debts aren’t necessarily covered in a consolidation loan, so you may have several debts that still need to be dealt with outside of your consolidation loan.
Finally, payments aren’t always affordable. Consolidation loan payments include 100% of amount owed PLUS interest, resulting in higher payments than other debt settlement options.
So, when is a consolidation loan a good option?
They are a good option if you have:
- More assets than personal debts (not insolvent)
- High income and can afford to pay all debts including interest
- Own assets that can be used as collateral for loan
- An excellent credit rating
If you’re wondering if a consolidation loan is the best option for you, contact our office for a free initial consultation. We will review all of your options with you so you can make the best decision based on your personal situation.