This consumer has a very good question about how to consolidate debt. His total debt is $28 thousand consisting mainly of credit card debt at high interest rates. He does not have any equity to speak of other than the small amount of equity he has in his car. He currently rents and does not own any property for personal use or investments. He is looking for assistance in finding a debt consolidation loan. He has also asked us to keep this application general so that no one can link him back to his employer.
Many consumers find it difficult to consolidate their debt in these situations due to the fact that they are considered higher risk borrowers. They typically are only eligible for non secured personal loans at interest rates that depend on their credit rating. Consumers with excellent credit ratings can often qualify for personal loans with competitive interest rates. If your credit rating is not in the excellent category, these consumers will pay a higher interest rate on a personal loan due to the perceived higher risk associated with their lower credit ratings.
Consumers in this category, particularly with low credit ratings may often not qualify for personal loans at traditional lenders. As a result they often turn to payday loan lenders who charge very high interest rates and fees associated with processing the loan. Consumers would be better off just continuing to pay their monthly payments and avoid payday loans of this type. The cost of borrowing is just too high.
Debt consolidation loans in general are usually a smart approach to take, however as with most things in life, the devil is in the details. We urge consumers to do the math and compare their current costs with those of the debt consolidation solution. Don’t forget to include any fees that may be needed when you make the comparison. Once consumers have compared their debt consolidation solution, the monthly payments and the cost of borrowing a debt consolidation loan, consumers can make the right decision for their particular solution.
As a final note, regardless of what solution is settled on, consumers are encouraged to meet all of the terms of their loans to maintain and / or improve their credit rating and ability to borrow funds in the future.