You must have been given an option for opting for a Consolidation Loan by your bank. This article is going to talk about what is consolidation loan and other useful information about it.
So, what is a consolidation loan, and when do you take it?
Consolidation is one of the four ways to pay back your loan.
When you have multiple loan repayment to different financial institutions each, to reduce the chances of falling into a debt trap, we have consolidation loans. So, as the name suggests, a consolidation loan is a consolidation of your loans. Your multiple loans get combined into one. So, when you are repaying your loan, you are paying for all X number of loans at once.
When you pay back your loan as a consolidation loan, your money is successfully distributed to the respected financial institutions.
You opt for a consolidation loan when you want to get out of a debt trap or manage your personal loan properly.
It is really important to choose the correct institution which will facilitate your loan repayment to avoid fraudulence. Also, choosing a proper licensed money lender debt consolidation. This will help you in finding one of the best personal loan Singapore services.
Different types of Consolidation Loans
Choosing a consolidation loan which is suitable according to your situation will help you in resolving your debt issues quicker.
- Student Consolidation Loan
- Consolidation by using a mortgage or home equity loan
- Unsecured Consolidation Loan
Student Consolidation Loan
As the title suggests, this type of consolidation loan is for students. You need to qualify as a student to be able to apply under this category of loan. By opting for this loan, the rate of interest applied to your loan will not increase because the rate will be locked.
For example, your loan for all four years of university or college will combine into one.
Basically, you will be paying small amounts but for a longer period of time.
It is really important to choose the correct institution which will facilitate your loan repayment to avoid fraudulence. Also, choosing a proper moneylender debt repayment plan.
Consolidation by using a mortgage or home equity loan
This is the second type of consolidation loan. This consolidation loan works by either borrowing against your home value, that is, home equity loan. It helps because it charges lesser interest rates on your loan amount. But this comes with the risk of you losing your home. You are in danger of losing your home in the process if you fail to repay the loan. Moreover, it will also reduce the value of your home.
In other words, it is very risky to opt for this type of consolidation loan. It is really important to choose the correct institution, which will facilitate your consolidation loan repayment to avoid fraudulence. Also, choosing a proper moneylender debt repayment plan.
Unsecured Consolidation Loan
The third type of loan offered by banks to us is Unsecured Consolidation Loan. They are Also known as signature loans. The interest rates are higher than the mortgage. But the interest rate is lower than the interest rate of credit cards.
It is advisable to go for another Consolidation loan repayment because the lower interest rate does not do any benefit. Instead, there are chances that you might just go back into credit card debt.
Thus, it is really important to choose the correct institution, which will facilitate your consolidation loan repayment to avoid fraudulence. Also, choosing a proper moneylender debt repayment plan.
Will I get out of debt if I choose Consolidation Loan?
It depends on the type of consolidation loan you have opted for. But answering this question in general, a consolidation loan will help you in reducing the payment of the monthly debt (s). Moreover, save the amount of interest from your loans. Debt consolidation loans can help you reduce a lot of amount of debt from your total amount of debt.
However, it is still risky. A consolidation loan may be a good option to repay your loans. But you need to take into account a lot of important factors and facts about opting for a consolidation debt.
Besides taking into account certain factors, one needs to work on their personal working habits as well. For example, successfully repaying the loans and then going back to negative money spending habits like maxing out credit cards.
The best way to efficiently take advantage of the consolidation loan is to plan out your budget. Anything related to financing or finance should have a pre-planned cost, expenditure structure ready beforehand. This will not only benefit you in carefully and properly spending money during the duration of repayment of the loan. But also, help you save more money and have enough to pay back your loans.
This method is guaranteed to give you better results and take control of the finances that were once spiralling out of control. Additionally, following and having a proper debt payment or repayment plan along with budgeting, your finances will do wonders for you. The quicker you will be able to reduce the amount of interest on your loan (s), the quicker you will be able to pay it off. Like:
- Writing down all of your debts
- Ranking your debt amount and value for each entry/ record
- Finding extra sources to repay debt
- Prioritize one debt at a time and not multiple at once
- Saving constantly and building savings
This final factor cannot be emphasized enough, and that is:
It is really important to choose the correct institution, which will facilitate your consolidation loan repayment to avoid fraudulence. Also, choosing a proper moneylender debt repayment plan.
Keeping track of your bank activities and transactions are also important. It will keep you alerted and can help you save up some cash when any bank error occurs and deducts amounts.
You always have a choice to opt for better schemes and qualify for different and better loan repayment services. Also, do take time to check and read the reviews of de financial institutions who will be facilitating your consolidation loan repayment.