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What is a Consolidation Loan and How will it Benefit you
Simply put, debt consolidation involves taking out one larger loan to pay off an existing debt.
Why would anyone want to take out a loan to pay off another loan?
The answer is simple:
A Consolidation loan allows you to make one payment every month, as opposed to making payments to many different parties. You will in effect be putting all your debt into one big pot, and making one monthly repayment, at a lower interest rate.
The loan is paid back at a lower interest rate when the debt is consolidated, because the loan that is taken out is secured against an asset. The asset acts as collateral for the institution lending the money. If you borrow the money and default on your payments, you can be forced to sell the asset to pay back the loan.
Debt consolidation can be a good way to pay off credit card debt. The interest payable on a credit card will be significantly higher than the interest on a consolidation loan. The interest payable on a consolidation loan can be up to 50 percent lower than credit card interest. The same can be said for administration charges on your various monthly expense accounts. Consolidating your debt will lead to savings on these accounts because you will only pay interest and fees on one account.
The institution that you lend the money from will also help you to structure the repayments so that they fit in with your budget. Your monthly income will have an effect on your monthly repayments each month and the total amount you will be allowed to borrow.
Loans can be secured or unsecured. A secured loan involves using your home as collateral for the loan. If you fail to make your monthly payments the bank can force the sale of your home. The advantage of a secured loan is that you will be able to lend a much larger amount than you would in the case of an unsecured loan.
An unsecured loan involves lending money without having to put up any collateral for the loan. While this protects your property from foreclosure the amount you will be able to borrow will be considerably lower. The interest rate will be higher because the bank has no security in the event that you cannot pay back the loan.
Looking For Information On Student Debt Consolidation Loan?
While it is agreed by everyone that education is good and greatly appropriate, the depressing news is that not everyone has the financial capacity. It is not everyone that is born with a silver spoon. While some people can find the money for their college or university education without strain, others cannot. It is for the latter group of people that student loan is proposed for. It shows that you can now find the money for your college or university without worrying about the financial implication.
The need for a student loan cannot be overemphasized for any person that does not have sufficient cash. It is more appreciated when you recall the lots of fees that the student to have to struggle with in the course of his or her studies. This always leads to seeking for more loans than it is required. This is where a student debt consolidation loan comes in.
The attractiveness of these loans is that its payment can be deferred till when you graduate and become gainfully employed. The repayment starts when you start your job. This is an obligation you must carry out. In other words, you have agreed to this when you were signing the document for the loan. So, there is no issue of running away with the loan. Another clause to the student debt consolidation loan has to do with the time limit for the repayment to commence after your graduation. This gives you sufficient room to hunt for and secure a good job that will afford you the prospect to start payment as soon as possible.
If cash have been the clog in the wheel of progress of your educational pursuit, it is highly appropriate that you hunt for a student loan. No matter how many times you go for such loans, all of them will be rolled into a student debt consolidation loan for you. The reward is huge.
Furthermore, with a student debt consolidation loan, the interest is always low. This takes out the strain of paying the principal and the attendant high interest. It is a win-win situation for you and the financial institution. You win by being able to hunt for and secure a good job that will help you pay back the loan while the institution gets back its money according to schedule with a little interest on top.