3 Reasons to Apply for a Consolidation Loan

by GuestPoster on September 9, 2011

Debt is a part of every individual’s life. We tend to go for credit because we want to start on home savings and loan applications seem to be a good option for starters. Savings bond is offered everywhere as well. In any discussion on how to save money, professionals and individuals alike do have different things to say and thoughts to ponder. Savings and loans are correlated no matter what.

When one is already in deep debt, there are two ways to solve it. Either by debt counseling or another way by debt consolidation. Debt counseling is done when a person is unable to make repayment for the credit on his own that he needs help from a debt counselor. Debt consolidation is done by combining all of one’s debts and pay it one time big time. The main process in order to get this completed is to get a separate loan granted to pay the other outstanding loans. The debt consolidation program is often offered with less interest rates half the time. Sometimes when a person opts for a debt consolidation, before the loan gets granted the institution that is willing to service a loan will ask for a collateral. A collateral can be a form of any property like houses and owned cars. Debt consolidation was born in order to as much as possible reduce the potential filing of bankruptcy.

There are three major reasons why a person opts for a loan consolidation. However, there are different reasons for different parties and individuals. Listed below are the most reasons behind why people get to consolidation one way or another.

1. To get a better credit standing. It is a known fact to everyone that when there are so many outstanding delinquent accounts reported to the credit agencies, the credit score goes down. The reason for that is because the person’s level of risk as a borrower goes down when the score goes down. It is important that the credit report from the three major credit reporting agencies are able to reflect accounts that are in good standing. When one does the consolidation of loans, it is only going to reflect one revolving account in good standing which can equate to a good score rating.

2. Convenient Wise. It is not easy to pay several loans when the pay comes in. There are cases where one tends to forget to pay one bill over another and that could lead to bad payment records. It is more convenient to have all those loans and just pay one place at a time. This also refrains a person from confusing himself whether or not one bill was paid.

3. Lower Payment Scheme Monthly. Debt consolidation being offered to the consumers are at a lower rate most of the time, the monthly premium that has to be paid is lesser compared to compounding all those debts plus the interest rates for each of them. Having that calculated could mean that it can save more money than having to pay them one by one.

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