↓ Archives ↓

How Debt Consolidation Saves Money

How Debt Consolidation Saves Money
written by: writergirl28

The term “debt consolidation” refers to the practice of combining several debts into one account. This results in the borrower only having to make one debt repayment per month. There are many benefits consumers can gain from combining their loan accounts.

Borrowers who consolidate their debts will save money in the long run. This is because combining several debts usually results in a lower interest rate. Most people have several debts. Each of these debts will have a different rate. Some rates are over 20%. Those who combine their debts, will be placing them under one interest rate. This will generally result in a lower overall monthly payment. Consumers will then have more spending money each month.

There are several debts that can be included in this type of loan. Some of these are listed below.

– Credit card debt.

– Bank loans.

– Finance company loans.

– Department store credit card debt.

– Hire purchases.

– Tax debt.

– Legal or medical fees.

– Utility Bills.

– Collection agency fees.

Applying for this type of loan is relatively easy. All borrowers need to do is contact a lender and fill in an application form. Those who have good credit and a regular income should contact their bank. Banks tend to have lower interest rates than finance companies. However, they also have very strict lending crieteria. Most banks will not touch a customer who has poor credit. People in this situation will need to approach a finance company. While finance companies have higher rates, most borrowers will still find that they save money by getting a consolidation loan.

Borrowers should take the time to shop around for a lender. Even banks offer different rates from one another. Ideally, consumers will get a quote from a few different lenders. Once they have done this, they can take the lowest quote to the companies which offered higher rates. Some companies may be willing to discount their rates in order to keep the customer with their company.