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Low Interest Debt Consolidation Guide

Low interest debt consolidation is often a worthwhile option to consider for easier debt management and repayment. Whether the person has okay credit or their FICO score has already been damaged, they may still be eligible for loans for debt consolidation, even loans with low interest rates.

When it comes to low interest debt consolidation loans, there are several companies that may offer these types of services and the consumer should familiarize himself with the process of obtaining this kind of funding. This alone can save the consumer a significant amount of money in interest and ensure they are doing business with a legitimate company.

How Debt Consolidation Loans Work

The theory behind low interest debt consolidation loans is actually quite simple. The consumer borrows enough money to pay the obligations that he or she owes in full, eliminating multiple monthly payments and high interest. As a result, lower interest rates accrue on the principal of the balance. This small intervention can actually save the person anywhere from hundreds to even thousands of dollars in penalties and fees from their creditors.

Types of Low Interest Debt Consolidation Loans

There are many different types of consolidation loans which may be available. Most often these entail either a home equity loan or line of credit and personal loans. A low interest debt consolidation loan based on home equity may be easier to obtain for the person than less-than-perfect credit. This is because the home acts as collateral. Low interest consolidation through personal loans is an option, but the rates still may be a little higher depending on the individual’s history with creditors. Late payments, non-payment and high income-to-debt ratio can play a significant role in this but there are bad credit debt consolidation services that may lend to the high risk applicant.

 

 

Another option for low interest debt consolidation is through the use of credit cards. If you have several loans outstanding and a large enough credit card balance limit, you could tap into this. Alternatively, you could consider opening up a new card. Currently, with an overall low interest rate situation, quite a number of these balance transfer offers have low rates and some even offer reduced transaction costs to get started. The key advantage of this is that it is easy to access. You can get a credit card balance transfer that lets you consolidate all your debts, started through just a phone call or filling out a balance transfer check. The disadvantage is that some of the low interest rates offered are teaser rates that last only 6 months (or even less), and rates go up quickly if you miss a payment.

The newest alternative to more traditional ways of loans consolidation is to try peer-to-peer low interest debt consolidation that is have cropped up because of the internet. A site like Prosper will connect individual borrower directly with individual lenders. The lenders are not traditional banks and loan companies that go by strict financial metrics when extending loans. For people with great FICO scores like 700 and above, they can often secure low interest rate loans through places like Prosper. At the other end of the spectrum, many with bad credit who may not qualify for a loan in most places have also successfully received bad credit debt consolidation loans through peer-to-peer lending.

Application and Eligibility

As with any other type of lending, the individual is required to fill out an application for a low interest consolidation loan. The applicant has to supply some basic identifying information and financial information, such as income, outstanding bills and allow the lender permission to obtain a credit report. These things will guide the determination of eligibility. In many cases, the person will also be asked about assets. Lenders may do this to approve the application if the person should need to provide collateral. There are many services that will allow the potential client to apply entirely online and even to compare loans from their competitors.

Some folks worry that they have too much debt outstanding, bad credit and low FICO scores to qualify for a number of these loans. There are a couple of options to consider. Firstly, they could try credit or debt counselling services to see if there is a possibility to negotiate and lower their current level of debt. Once they have negotiated down their debt, the doors could open to more loan consolidation options.

The risk is that loan companies may be less willing to do business someone who are using credit counselling services. However, when push comes to shove, it may be an effective step to take to arrive at a brighter financial future. A second option is to try direct peer-to-peer lending as mentioned above. This bypasses traditional measures of eligibility that most loan companies employ.

Comparing Debt Consolidation Loan Offers

The smartest thing that the consumer can do is to compare terms between lenders. Just because a low interest consolidation loan looks reasonable, this does not guarantee that it is. The person must consider other associated costs. This can include the length of time it takes to repay the money and the potential for hidden fees. In addition, some lenders may try to slip in additional services that are simply not needed. Some debt consolidation credit card companies may offer generous terms initially but retain the right to increase the interest and tack on additional fees after a certain length of time. This can easily be avoided by taking the time to review all offers and read all of the fine print.

In summary, seeking out low interest debt consolidation is a good way to address a growing mountain of debt. Debt consolidation with low interest rates makes easier to manage your debt situation and save money through. Even if you may have less than stellar credit, it is likely that are various options open to you. Use the internet to uncover the options available, and make it a point to compare interest rates and read through the features of the loans before applying.