Before understanding the concept of Debt Consolidation, first we need to understand that, for which type of loan we can opt for Debt Consolidation. Debt Consolidation can simply be from a number of unsecured loans to another unsecured loan usually for a long term and with lower rate of interest.
Mostly the consolidation is seen in secured loans, where the borrower will mortgage his personal property usually house against the loan amount. It is in the form of collateral security to secure the creditor from the loss of bad credit. Payday loans are means of getting instant cash the repayment of which is tied to your next pay check. We many times found ourselves in a situation when our next pay check are few days far still and we need to meet certain emergency expense before that. In such condition payday loan will be of great help to you, as the banks will have to follow their procedural process for documentation which will take time. Also we use credit cards in order to make our routine bill payments. These credit card companies charge higher interest rates compared to other loan industry.
Pay day loans are no documentation quick loans, so the interest rates are high. So when we are paying higher interest rates for the loan, we will find ourselves into financial trouble and at some point of time if our income will not increase at same level as our expense, we will find ourselves into debt trap. In order to save you from such a situation it is better for you to opt for a Debt Consolidation. Here you will be given many options and you can choose as per your capability. Debt consolidation sometimes gives temporary ailment and does not address the root problem.
The process of Debt Consolidation is very simple now days, due to online application facility. You just need to fill an application and attached or fax certain personal documents as required. The lender will ask you directly if any of the information is missing. The borrower has to provide the required information within 14 days of letter of inquiry received from lender. If the borrowers’ loans are in default the consolidator will try to negotiate on borrowers behalf about the full and final settlement. If the loan is approved the funds up to the borrowed amount will be directly transferred to previous lender after getting confirmation from borrower and a loan statement is generated ad will be send to borrower.
Borrower has to continue making payment to current lenders until the application is approved and funds are transferred. Also before applying for consolidation it is to be taken care that how much far away you are to you full repayment. If only few instalments are pending then it is better to make it repaid through your monthly income and not going for consolidation. There is no point to extend the tenure for such small balance amount and increase the rate of interest. So a proper balance between income and debt can be made with the help of Debt Consolidation.