2017 showed a considerably stable world economy. The beginning of 2018 was a bit more than staggering when the growth first plateaued and then plummeted steadily during the first quarter. With the rise of the bear, not just a lot of SMBs, but individual investors, white collars and blue-collar job holders have been facing the economic jitters. 2017 saw one of the highest incidences of personal loan applications and sections in the last couple of years. People were hoping to borrow the money to either invest in businesses or simply improve their standards of living since the market interests were low. As a result, quite a few lenders leaned towards high-interest short-term loans and even payday loans for short-term investment opportunities. However, the market surely betrayed the ones, who took out the floating interest loans during the last quarter of 2017.
How bad is your debt situation?
Now, about 70% of the US households owe their credit card companies almost $4,427 at an average. There are other loans, including outstanding education loans these families have to pay off. Some of them are juggling a second mortgage on their homes and have their cars as collaterals to secure loan companies as well. The situation is becoming grimmer by the day and if you register with any of the loan situations we have mentioned this far, do not worry. First, visit nationaldebtrelief.com to know all you can about the nature of your loans and the way you can access relief from credible sources.
A step before debt consolidation: debt counseling
Next, you need to find a way to stop your revolving lines of credit from draining all your family finances. Did you know? Is debt consolidation not just for businesses and entrepreneurs? Even personal loans from multiple sources become a lot manageable with debt consolidation from the right places. To find the right sources of help, you must first find a debt counselor. There are probably several non-profit organizations that provide debt counseling services to personal loan holders. They restrict their services to advice on prioritization of debt, transfer of debt from a high-interest account to a low-interest credit card or better management of the budget. They do not offer any financial aid.
In fact, as per the experts, personal loan holders often do not need external financial aid. They need a push in the right direction that can help them manage their monthly expenses better. Cutting down on your morning Starbucks coffee or changing your salon schedule from once a month to once in 45 days, can make a lot of difference in your monthly budget. Small things can have a huge impact on monthly savings, and a debt counseling agency does just that to help you see it.
How to choose your debt consolidation loan company?
In case, financial aid is imperative; you must refrain from taking another bad loan decision. Look for debt consolidation loan agencies with authentic customer reviews and documentation. The genuine ones do not charge more than the processing or origination fee. Consolidation loan agencies can be quite notorious, and you do not want to work with one that puts profit before their clients. Agencies with indisputable reputation are not very difficult to come by, but you will need to invest time to research each one on your list.
The first filtering criteria
Start filtering your debt consolidation loan options by the interest the agencies are charging. On credit cards, the Annual Percentage Rate (APR) can range between 13% and 18%. Sadly, in cases of defaults and other complications, the rates often skyrocket to 20% and even 30%! You must remember that the new loan you are taking to manage your existing loan should offer you financial relief. This obviously means lower APRs. Typically, people should go for debt consolidation loans with lower than 8% interest rate per annum.
However, the lack of prior personal loan management often means the lack of credit score maintenance. With bad credit scores (lesser than 700 or 680, the terms vary between agencies), you might find it difficult to get an interest rate below 13%. This is a Catch-22 situation. Nonetheless, you need to compare the APR on the new loan to the APR on the existing personal loans (summation of the APRs over total repayment period) for the correct numbers. Go for the consolidation loan company that helps you save the most in the long run.
Choose your loan lifetime wisely
The repayment period of your new debt consolidation loan will play a significant role in the amount you expend over the years. A personal loan related consolidation loan usually has a repayment period of about two years. The repayment can exceed 6 or 7 years, but with the addition of each year, the net payment on the loan also increases. This can make choosing the right loan option difficult for you. A shorter loan term comes with more challenges, but better financing opportunities. A longer loan term makes it easier to pay off the entire amount with smaller monthly installments but increases the total lifetime cost of the loan. In fact, in case of a longer term, you might even end up paying more in interests than in the principal, if you are not working with the right company.
The company should take an interest in your interests
Choose a company that takes an interest in its clients. There should be customer care executives and loan managers present 24×7 to answer your queries. Companies dealing with finances need to be client-oriented. It is a given that borrowers will have questions about payment deadlines, pre-payment penalties, loan qualification terms and even amount transfer methods. Companies that do not seem keen enough to answer your queries now are likely not to encourage your curiosities later on. Debt consolidation loan is a serious affair, and the company that pays as much importance to your experience as they do to their accounts is always the better option.
To ensure that you find the best option, shortlist a few companies and apply to all of them. Getting through but not following through will likely not harm your record. You can always apply back or keep the rest as a backup in case your first choice falls through.
