Types of Debt Consolidation Loans
If you have a large amount of debt then you may have considered taking out a debt consolidation loan. With this type of loan you will combine your high interest rate debts into one loan that has a lower interest rate. Your monthly premium is then lower so that you can afford your bills more easily.
There are few types of loans that you are able to use to consolidate your debt.
Home Equity Loans
This type of loan is taken out using the equity in your home as collateral. You will need to have a fair amount of equity in your home and a good credit in order to qualify.
The interest rates on this loan are generally lower than other types; the problem is that your home is now at risk. If you are unable to afford the repayments then your home could undergo foreclosure.
Credit Card Balance Transfers
A low interest rate balance transfer means that you will transfer all of your credit card balances to one credit card.
A low balance transfer interest rate is generally only valid for a certain period of time. You will then need to know when the low interest rate expires.
The only problem with this though is that your credit score could take a hit. Putting a lot of debt onto one credit card could have a negative effect on your credit score.
A personal loan is a type of unsecured loan that has fixed payments for a period of time. You can use this type of loan to consolidate your debts. However approval of this type of loan can be hard to get.
Debt Consolidation Loans
Banks and credit unions offer these loans so that you are able to combine your debts. This type of loan will have a lower interest rates and increasing the repayment period lowers your monthly repayments.
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