There are a lot of people out there, who have number of loans than they can manage. A hard time trying to keep track of loans does not necessarily mean a future of bad finance. Everyone has faced this financial tryst at least once in their adulthood. In fact, it is an indispensable part of adulthood in the modern economy. Increasing number of payments per month and surmounting interests call for better management and smarter measures.
Debt consolidation often provides relief from such strapping situations. However, in the precedence of debt consolidation loans and debt consolidation programs, you might find it difficult to choose one over another. The choice you make will be critical since there are a few fine differences between the two. Either one of them can precede your financial freedom shortly. Both of them have the power to get rid of unwanted interest rates and unpleasant creditors, but which is the one that can become the key to your liberty?
What is a debt consolidation program?
A debt consolidation program is a lot like a debt consolidation loan. In this process, you forward a single payment to a non-profit company that makes the pending payments to your creditors. This kind of service usually comes from credit counseling companies and organizations. The non-profit organizations usually charge a lower tariff for the management of your loans.
What is a debt consolidation loan?
You can find a debt consolidation loan at the SBA, banks, credit unions and dedicated online debt consolidation loan companies. Rarely, any of them are non-profit. If you are working with a non-profit organization right now, you are likely dealing with a debt counseling agency. As per the norms of a traditional debt consolidation loan company, you apply for a new loan amount that can cover your outstanding dues in the market. You pay the consolidation loan company in installments over the repayment period.
How are these similar to each other?
These two processes that deal with personal loans and professional loans are quite similar in their approach, but they are very different procedurally. Here are a few striking similarities between debt consolidation loans and debt consolidation programs –
- You will convert multiple loan payments into one per month
- You will shift from floating interest rates to a fixed interest rate
- You will find a better interest rate that reduces your monthly expenses
- Your APR will be more manageable since it will be lower
- You may take longer than planned to pay off your debt since the debt consolidation companies offer easier and smaller monthly payments for longer terms
The similarities remain strong as long as you find a reputable agency to take care of your debt problems. A program is simply a service that can help you manage your payments and pay off the creditors at one go. Nationaldebtrelief.com can help you understand the key differences between the two approaches.
How to get a good debt consolidation loan offer?
No good debt consolidation loan company will ever come knocking on your door. Ringing a service up after seeing a hoarding or a TVC is a terrible idea. For every financial decision you take involving consolidation of your existing loans, you need to conduct thorough research. Choose a company with a strong online presence and physical presence. A company with a good and long history of business confers trust. However, many of the reputed ones often charge a higher origination fee and a higher interest rate.
The only way to ensure that you get all the better offers is by keeping a decent to good credit score. It can seem quite ridiculous at the moment especially since you are trying to make all the payments on time, but if you can somehow manage to do so for another 3 to 4 months, you will see a significant leap in your credit score. A better credit score is the sign of a smart spender. Banks, credit unions, and even private lenders feel more comfortable lending money to people who spend smartly. They often come up with better repayment terms including lower interest rates and better APRs.
Do debt consolidation programs cost money?
People believe that services that come from non-profits are usually free of cost. However, that is untrue in case of all leading debt counseling companies across the US. The good companies offer services of NFCC certified counselors only. You need to pay a monthly fee or a one-time fee, depending on your need and the terms of the agreement. Now, since you are already going through a financially rough patch, we advise you to compare those prices before you pick a company.
Secured loans vs. Unsecured loans: which one should you go for?
When dealing with crippling financial issues and no chance of immediate cash flow, you need to consider debt consolidation loan options. Even debt consolidation loan companies can demand collateral. In fact, secured loans are often much cheaper as compared to unsecured ones. Most companies offer unsecured debt consolidation loans against a high-interest rate. This is simply because the lack of collateral increases the risks significantly. Most credit cards and personal loans are unsecured; hence they have a high-interest rate. Be very careful while choosing the loan type, since high-interest rates and multiple loans got you here in the first place.
What to do immediately after getting into a debt consolidation program or getting a debt consolidation loan?
First, try to chalk out a monthly budget. Next, keep your bank accounts and credit cards active. Use your credit cards to make utility bill payments but keep them active. This will help you contribute to your credit scores, while the debt consolidation company takes care of your outstanding debts to multiple creditors.
Before everything, you need to ask yourself whether you need a debt consolidation program at all. Many people need debt counseling or the guidance of a personal finance advisor. You can always save a few bucks by handling your finances yourself if you have the smarts.