The Low Interest Debt Consolidation Route to ease the debt burden
When you think of going for debt consolidation then don’t just bring all the debt under one lender you have in mind. More than that you want to save money that you have to pay in the form of high interest rates and, in many cases, you want to save your credibility too. Low interest debt consolidation is useful to reduce the amount you pay as a monthly installment so that you have more money at the end of the month. Consolidation of low interest debt allows one to increase his credit score.
However, instead of rushing to a lender for low interest debt consolidation, you must first do some homework and look to arrive at an interest rate that suits your budget and the amount you need.
The first step towards consolidating low interest debt is that you make the best use of your property to be offered as collateral to creditors. Any house, car, bank account or property is enough to convince the creditor of the loan. Because the goal here is to take advantage of low interest rates, see if collateral is valued higher or is easily sold, such as a car. In having such security, lenders usually agree with the low interest rates demanded by the borrower. But the amount you request from the lender also plays a big role in determining the interest rate.
Lenders usually offer loans for the consolidation of low-interest debt in the range of 5,000 to 70000. You will certainly ask for an amount that pays off all of your previous debt. But it will benefit you even more in bargaining with low interest rates if the amount requested is less than the value of the collateral.
You can get loans from many sources. Look for small local banks or financial companies, because they will easily offer consolidated loans with low interest rates to increase their business. Also compare the interest rates of different lenders online so you choose the right one.
Loans for low interest debt consolidation can be available at variable or fixed interest rates. If you choose a variable rate, you might get a low interest rate at an early stage, but it is likely that the interest rate will increase in a few years and you end up paying more. On the other hand, the interest rate remains at the same lower rate in the fixed rate loan option.
The duration of payments is also very important in utilizing debt consolidation with low interest rates. Consolidation of low interest debt should not exceed 10 years and it is better to keep it in 5 years to avoid higher interest costs in the long run.
Keep in mind these basic but vital tips when you decide to choose low interest debt consolidation to avoid the road trap.