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Consolidate Your Debt by Applying for a Personal Loan

Consolidating your debt is a great option for many people. If you have a substantial amount of debt, if you’re trying to make things simpler by paying off your debts, or if you’re carrying a balance on multiple high interest credit cards, you may benefit by consolidating your debt with a personal loan.

What are the benefits of consolidating with a personal loan?

  • You're not putting your home at risk. If you take out a second mortgage or use a home equity line of credit to consolidate your debt, you’re using your house as collateral.

  • A personal loan will allow you to consolidate debt without collateral.

  • Consolidating your debt makes managing your payments a lot easier. Rather than making multiple small payments to a number of different creditors, you can simply pay one bill. There's no need to keep track of the due dates and interest rates on multiple accounts.

  • You’ll pay less money in interest. The interest rate on your consolidation loan will be considerably less than the 18% to 24% or more that a lot of credit cards charge.

Some Other Options to Consider for Paying off Debts Although a consolidation loan may be your best option, it certainly isn’t the only choice!

Check out these other ways to chip away at that debt:

  • Try negotiating with your creditors. If the reason you're seeking a consolidation loan is because you want lower payments or a better interest rate, call your creditors and see if they would be willing to work with you.

  • Create a payment timeline. Figure out if you might be able to pay off your debt in a reasonable period of time.

  • For example, ask yourself if you could pay off your debts in a year or less. That may be a better option because it would be easier than spending time and effort applying for a consolidation loan.

  • Consider all of your options. If your debt is fairly small, a consolidation loan may not be the best option. Because your payments aren't very large and consolidating the debt would result in minor savings, you really don't need to consolidate a small amount of debt.

Tips on Applying for a Debt Consolidation Loan

By now you may have decided that a debt consolidation loan could help you save money and pay off your debt sooner.

Consider these ideas when applying for a loan:

  • Shop around for the best deal. Not all loans are created equal. By shopping around you’ll ensure that you're getting the best interest rate, which can save you a substantial amount of money.

  • Ask about possible fees. Sometimes, what seems like the best deal really isn't.

  • Be prepared for some small processing fees, but if a lender is charging you anything over $100, look for another lender. There is more than likely a competitor with a better offer.

  • Ask about an exact interest rate and find out what your new payment will be. Before you sign your name on the dotted line, be sure that your new loan is a good deal, and that it doesn’t leave you worse off than before you consolidated your debt.

In addition to everything mentioned so far, you may also want to get a copy of your credit report. That will let you know exactly where you stand as far as the amount you owe and the number of creditors you have. You’ll be able to see that you’re including all of your high interest debt in your consolidation loan without missing anything.

Use these tips to determine if a consolidation loan might be and effective solution for you. In many circumstances, it can save you a lot of worry, time, and money.

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