Benefits of Debt Consolidation With a Personal Loan

Benefits of Debt Consolidation With a Personal Loan

By: James Abbey, June 17, 2016

If you need of money to pay off your loans but are having a hard time getting it, know that you’re not alone. Navigating the labyrinth of credit card fees and regulations can be a hassle; finding a facility that will work with you to pay it off is even more so. Luckily, there are other options to consider when you want to consolidate your debts.

Using Personal Loans

In some cases, paying off the interest on your credit cards can amount to about as much as the debt itself! That’s why so many people are looking to alternative like personal loans. Unlike credit cards, personal loans offer lower interest rates and flexible payment schedules. They enable people to pay off their debts more quickly and within a convenient timeframe.

What is a personal loan?

A personal loan is when you borrow money to pay for anything in your life that can be classified as personal. This can be a wedding, vacation, new computer, or medical bills. There are two types of personal loans: secured and unsecured.

Secured loans require you to put down collateral, such as a car or a house. This backs up the loaner in the event you don’t make your payments. Unsecured loans do not require collateral and are known as “consumer” or “signature” loans.

Where can I get a personal loan?

You can obtain a personal loan at banks, credit unions, or online lending companies. The amount you are permitted depends on the lender, your income, and your credit. Unsecured personal loans can range anywhere from $2,000 to $35,000 and have a fixed interest rate. If you need more than that, you’ll most likely have to turn to secured loans. Note that most personal loans do come with an origination fee (usually a one-time fee deducted from the loan proceeds) that could be 1% to 10% of the loan amount.

What are the benefits?

Quick payoffs: Oddly enough, credit cards will often penalize you for not stringently adhering to the allotted pay schedule (i.e., paying off more at one time). This isn’t the case with personal loans. They have a certain amount of flexibility with their repayment terms, and they simplify the payoff process. You won’t have to worry about late or overdraft fees, and making one payment, rather than several, helps keep you on track and organized with your payments.

Flexible payment schedule: Repayment length is also more flexible, and can range anywhere from 3 to 10 years; if you want to pay ahead of schedule, you won’t be charged a prepayment penalty.

Start Your Debt-Free Journey Today

Taking out a loan to pay off other loans may seem counterproductive. However, remember that no loan is a long-term solution. It is important to carefully consider your options before deciding your next move. With enough determination and patience, you will be able to climb out of your debt mountain and reach the clear skies of financial freedom.

If you’re thinking about a personal loan to pay off your debts, click here to explore your options with our personal loan tool.