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Should I Consolidate My Debt?

2/18/2015

 
The reason for debt accumulation can dramatically vary. While you may have racked up debt through medical bills, credit cards, auto loans or a multitude of other avenues, eliminating this debt as quickly as possible should be a priority in your financial goals. Unfortunately, due to ultra-high interest rates or changes in your monthly income may make paying off debt nearly impossible. When this is the case, you may be considering debt consolidation. While there are some real benefits of consolidation, there are also some very real drawbacks. Before moving forward, take a moment to determine if this financial decision is best for you.

New Loan Interest Rates

Before delving into the world of debt consolidation, it's important to determine if choosing a consolidation loan is best for you. When credit card and auto loans become too much to bear, you may be able to enjoy lowered monthly payments and lower interest rates with a consolidation loan. In a nutshell, these loans are large enough to satisfy the original creditor(s). If you have excellent credit, you may be able to achieve a much lower interest rate; however, if your credit has suffered due to irresponsible borrowing and missed/late payments, then the consolidation loan interest rate may not be an attraction option.

Simplify Multiple Debts

If you have several credit cards and other forms of debt, the likelihood of accidentally missing a payment is very real. One of the most effective ways to eliminate this possibility is to consolidate multiple bills into a single monthly payment. In some cases, this process acts as a safety net for your credit score. Since missed/late payments can dramatically lower credit ratings, consolidating debt into an easily manageable single monthly payment eliminates this possibility. Also, as stated above, by consolidating into a single loan payment, you may save hundreds or thousands of dollars in interest payments.

Considerations

While there are many debt consolidation companies, you may be surprised that you can go about the consolidation process without the help of a third party. In some cases, this can save your credit score as certain credit counseling agencies report this activity to credit bureaus, which can reduce your overall score according to Your 650 Score. Eliminate this possibility by dealing directly with your creditors. While you may not be able to achieve a consolidation loan without the help of a third party, you can negotiate lower monthly payments and reduced interest rate with creditors. To do so, it's important to magnify your desire to pay off the debt as quickly as possible. Most creditors see this desire as a positive sign as you'll be less likely to miss payments if they bend their current loan elements to better suit your current financial situation.

 

Should I Borrow From a Payday Loan Service?

1/8/2015

 
Finding yourself strapped for cash when payday is weeks away is a stress-inducing experience for far too many consumers. Whether an unexpected bill popped into your life or you simply over-extended your monthly budget, payday loans seem to be an easy option for a quick loan. Although these loans are readily available throughout the United States, the true questions remain: should you borrow from a payday loan service?

General Features of Payday Loans


Although specific features of these loans may vary from company-to-company, the general elements found in payday loans, or payday advances, are:

I. Small Amounts - The typical amount borrowed through this means is less than $500. While it may be possible to borrow more, with high fees and an expected short repayment period, the less you borrow the better.

II. Short Repayment Terms - These loans are designed to float you until your next payday. Therefore, you should only borrow what you know you'll be able to repay with your upcoming paycheck. Remember, you're responsible for repayment of the actual loan and all fees and interest payments.

III. Checking Account Access - In order to follow through with a payday loan, you must give the lender a post-dated check with the full repayment amount. This check is then deposited when you receive your next paycheck.

Interest Rates

The reason many consumer finance agencies, include the Federal Trade Commission, find these loans to be less-than desirable are the interest rates associated with such lending practices. It's not unheard of to have an interest amount up to $30 for every $100 you borrow. To put this in perspective, let's say you borrow $100 with a two-week repayment structure. The total interest rate is $15. Therefore, your APR on this small loan is 400-percent. When you compare this to the average credit card APR, which is an average of 12 to 30-percent, payday loans are extremely expensive.

Should I Take Out a Payday Loan?

The ultimate answer to this question is dependent on your current financial situation. The goal when taking out this type of loan is to pay off the balance in-full by the two-week due date. Failure to do so can result in exorbitant interest payments. Only continue with a payday loan if you're able to afford its repayment terms. There's nothing worse than obtaining a loan only to be unable to repay this loan. If you choose to obtain a payday loan, get all interest-rate details and other vital information in writing before agreeing. This may help prevent spending double what you originally asked to borrow. Visit this helpful website for more information on the topic.
 

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