A debt consolidation personal loan is basically a personal loan that you can take out to pay off your existing debts once and for all. Doing so can reduce the amount of interest that you are paying. For example, if you have a $15,000 debt on 3 cards, one card charges 17%, the second card charges 15% and the third card charges 14%, getting a loan with an 8% interest will help you to save a great deal of money. People get trapped in a debt cycle because of the higher interest charges. By reducing the interest, it will become easier to settle the debt in a short amount of time.
When deciding which repayment term to choose, it is recommended that you choose the term that provides and affordable monthly repayment. Shorter term tends to have higher monthly payments but lesser interest charges. Longer term offers cheaper monthly payment but you will end up paying more interest charges in the life of the loan.
Now, your credit report has a new loan on the record. If you promptly make the monthly payment, you will be able to progressively reduce your debt and credit utilization ratio at the same time. This will lead to an increase of the credit score.
Getting a debt consolidation loan is not the key to become debt free. If you want to be debt free, you must be self discipline and stop carrying a balance on your credit card. When you wipe off your card balance, you may be tempted to use it again.
It will be hard for you to build your wealth if you keep on carrying a balance. This will be the case even if you can turnaround your debt situation with a loan that has lower interest. So, if you know you have bad money spending habit, it will be better to lock up the card and just use cash to pay your expenses.
If you want fast approval, you should apply the debt consolidation personal loan online. The loan comparison site can list the best debt consolidation loans based on your credit score and zip code. Many online lenders offer soft credit check for those who are interested in checking the interest. You can visit the official lender site to check the full features of the loan when comparing the options.
Before signing the agreement, make sure you understand the lending term and can fulfill it without any financial difficulty. The typical loan term of a debt consolidation loan is 3 – 5 years so it is not suitable for consolidating a small amount of debt. It is recommended that you get a zero percent balance transfer card instead to consolidate a small amount of debt that can be paid off in 1 year or so.