Personal Loans And Debt Consolidation Made Easy
(PRWEB) November 14, 2012
Some consumers find that even when they are diligent in paying at least the minimum on each of debt obligations each month, those balances never seem to decrease to any significant degree. This can leave them wondering if it is even possible to retire the debt and regain their financial freedom. The fact is that by using debt consolidation or personal loans to reorganize existing debt, it is possible to improve the possibility of getting out of the hole before the consumer is old and gray. The trick is to determine which of these two approaches is best for the debtor’s needs.
What are Personal Loans?
Loans of this type are sometimes referred to as consumer loans and are granted to individuals rather than business entities. A personal loan can be used for a number of different applications such as making repairs to the home, funding a vacation or helping with a child’s education expenses. A personal loan can also be used to retire current debts, leaving the borrower with only one obligation to meet every month.
As it relates to reorganizing debt, consumers seek to secure a personal loans that are equal to the amount currently owed to other creditors. Once the proceeds from the loan in hand, the money is used to pay off all those bills at once. Instead of having several bills to pay every month, the consumer now has only one to manage.
Personal loans are sometimes unsecured debt. This means the lender chose to work with the borrower without requiring any type of collateral or security. Consumers who have excellent credit and a reliable source of income can receive an unsecured loan with relatively little effort. Even if the applicant’s credit is not the best, he or she may still qualify for a secured personal loan, using assets that the lender considers acceptable.
How About Debt Consolidation?
Like a personal loan, debt consolidation is a means of rearranging debt so the consumer is left with one obligation to meet each month. With this application, the consumer works with a lender who specializes in providing consolidation loans. Along with basic financial data, the applicant also provides the lender with a list of creditors and the amount owed to each one. Assuming that the debtor meets the criteria set by the lender, the debt consolidation loan will be approved.
Unlike a personal loan situation, the lender will take on the responsibility of preparing and submitting the payments to each of the creditors. This can be in the form of cutting checks that are mailed to each one or using the information provided to submit electronic payments. In either scenario, the debtor receives confirmation that the payments were received and posted by each of the creditors.
Additional Benefits of These Solutions
Along with the ability to make it easier to manage debt, both of these solutions can save the debtor money over the long run. Depending on the rate of interest that he or she was able to command with the loan, it is possible to end up paying less interest on the cumulative total of the debt. Paying less interest means that the debt can be retired sooner rather than later.
Another benefit of this arrangement is that the debtor has a fixed amount to pay to the loan provider each month. With a little diligence, it is possible to work in an extra payment from time to time. Doing so will go a long way in helping to improve the borrower’s overall credit rating and provide the opportunity to retire the debt a little earlier than scheduled.
Keep in mind that even after obtaining the personal or consolidation loan, it is still important to manage those open credit accounts with care. Consumers should avoid accumulating balances on those accounts while the loan is being retired. Doing so will minimize the chances of the debtor incrementally creating additional monthly obligations that ultimately make the process of managing total debt more difficult than ever. DrCredit even offers personal loans for people with bad credit.
Want to learn more or apply for a personal loan or debt consolidation go here http://www.drcredit.com