Low Interest Rate Debt Consolidation Loans

An incredible number of people in the USA have got debt they are working to pay off in a cost effective and speedy way. Starting from high interest credit cards to multiple cards to loans with high interest rates, borrowers are normally torn between keep going with their payments each month or using another strategy to realize their goal, one debt with low interest.

Low interest debt consolidation loans are one effective way by which to ease the burden of paying off debt, improving bad credit and generally make life much simpler from a money management viewpoint.

Below we have listed debt consolidation loans with low interest rates. If you have bad credit, that will not be a problem either. We can also recommend you to start improving your credit score. To truly receive low interest rates offer your credit score needs to go at least above 650. Improving your credit score over time is possible, and in most cases you don’t need to drastically reduce your debt or raise your income.

Read more about how to improve your credit score.

Debt Consolidation – How it Works

Debt consolidation in the layman’s term is a single loan which has a few of outstanding debts joined together. These outstanding debts could be personal loans, credit card balances or any other kind of financial debts. When these outstanding debts are merged under a new loan, it will help the borrowers accomplish their payoff targets more quickly and efficiently. By opting to low interest debt consolidation loan, a borrower applies and obtains authorization for a new loan which yields a lump sum payment. The money received, minus any charges associated with taking out the consolidation loan, will then be utilized to pay off other debts.

With consolidation loans, debts aren’t magically wiped out. Instead, their configuration is modified so the monthly installments will be easier to manage or the borrowing cost (i.e., the rate of interest) would be less expensive.

Factors to Look Out for When Considering a Low Interest Debt Consolidation Loan

When it comes to decide if a combined loan is the right move in your case, there are several factors to be put into consideration beforehand. For a start, majority of money lenders charge service fees for debt consolidation loans.

The possible fees charged include:

  • Application fees – which is charged when the application is submitted
  • Late payment fees – which is charged whenever a monthly repayment is paid later than the due date
  • Funding fees – which is incurred whenever a loan is funded or approved
  • Origination fees – which is imposed when a loan is approved
  • Prepayment fees – which is incurred when the loan balance is paid off before its actual payment date

These fees are often added to the interest rates provided by the lenders on any new debt consolidation loan. It is important that you are aware of what charges are made on the loan to make sure it is a manageable solution for the repayment of the debt over time.

The most overlooked service fees are the penalty for prepayment. The fee is imposed when you pay off a loan balance before to the repayment term ends. If you are planning to clear the loan balance before its due date, it is not advisable to use a debt consolidation loan to pay off a debt that has a prepayment premium or to use one that includes a prepayment fee.

Debt Consolidation – The Positives and Negatives

There are several pluses and minuses regarding to obtaining a consolidation loan.

The Positives

Payments are Structured
With debt consolidation loan, you will only have to deal with just one loan with one monthly payment which is a lot easier and more efficient than keeping track of several separate loans. For instance, if you have three or four credit card balances that must be paid every month, hence you need to keep track on three or four separate monthly repayment due dates. When you opt to use the debt consolidation monthly repayment, you will only have one monthly repayment due date to keep track on.

Debt Costs are Lowered
You could also enjoy a reduced cost of the debt for your repayment process. The current credit card normally has over 15% interest rate, many borrowers pay over 20% of their balances on monthly basis. Limiting the interest rate does help to bring down the charges on the remaining unpaid debt every month. This could help save you 100’s to 1000’s of dollars over time.

Credit Score Improvement
This less well-known benefit of low interest debt consolidation loans helps fulfill a vital role in enhancing your financial status in the long run.

As payments for a loan are settled on time, a bad credit score gets a boost. If you clear your existing credit card balances by the use of debt consolidation, the immediate rise in your available credit also assists in improving your bad credit by bringing down the credit utilization rate.

The Drawbacks

Credit History Elements
Acquiring a combined loan with an affordable interest rate can be quite an uphill battle especially if poor credit is factored in. This cancels any benefits gained from a lower cost debt repayment plan.

Low Monthly Payments Equals Lengthy Repayment
Another one of debt consolidation loan’s downside is the longer repayment term offered on certain types of loans. Though a lengthier repayment term can reduce the amount of your monthly instalment, the sum of interest paid before it is finished will probably be even higher.

In Summary

Choosing to consolidate your debt is not an easy option. You will need to take some time to establish what low interest debt consolidation option is best for you, how well situated you are to obtain a debt consolidation loan or other help through a debt negotiation service, and be aware of the fees involved with those options. It is also important to keep in check of your own capability to honor your monthly installments and the duration of the repayment term as you decide to go ahead for the debt consolidation loan.

Take into consideration your qualifying credentials for getting a loan, whether you really need a debt consolidation loan or not, and your determination to keep your other debts to a minimum before you sign your debt consolidation loan.

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