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How To Negotiate A Debt Consolidation Loan

By Author: Adam
Total Articles: 59

The lifestyle trends and spending patterns with excessive use of credit cards and personal loans often lands one in debt. Taking yet another loan to repay the existing one, often at a higher interest rate leads to a vicious cycle of loans and debts. The individual gets trapped in a web of his own making with piling debts and fewer means to repay them. Vicious as it seems there still is a way to escape from this debt trap. The simple ‘reduce spending and increase earnings’ may not always work. At such times a debt consolidation loan works wonders and is an effective way towards reducing and completely clearing all debts.

Understanding Debt Consolidation
Understanding debt consolidation is an important step towards reconciling debts using this means. It is possible to combine different unsecured debts into a single new loan often on more favorable terms like a lower interest rate or a lower EMI (Equated monthly installment) or both. This method is especially useful for debts that are not linked to assets like credit card payments or student loans. While a debt consolidation loan is a safe way to reduce debt, it is always best to evaluate each individual’s reasons for taking such a step. What may work for one may only create unwanted complications and problems for another.

Pitfalls to avoid when consolidating Debt
Some of the pitfalls that should be avoided while consolidating debt include extending the loan term, continuing to live beyond your means, consolidating debt for convenience, paying large fees for a debt consolidation service or consolidating consumer debt using a home equity loan. A debt consolidation calculator is easily available online for helping individuals avoid such pitfalls. This calculator can help you determine both the time required to get out of debt as well as the interest that can be saved by consolidating the different loans and availing a single loan with either lower interest rates or lower monthly payments or both.

Debt Consolidation and Credit Rating
Understanding the effects of debt consolidation on credit rating is very important. The process of applying for a debt consolidation loan is the same as for any other personal loan. However, any institution making this loan would initiate a hard enquiry into the financial health of the individual who has decided to go ahead with this method of debt control. A hard enquiry will lead to a fall in the credit rating of the individual. This is however a minor sacrifice if it can help to control, reduce and eliminate the spiraling debt of the individual borrower.

How to Use a Debt Consolidation Calculator?
There are numerous debt consolidation calculators available online, which can be used to calculate the effects of a loan for consolidating debt in individual cases. The calculator helps calculate the expected time period within which the individual considering such a step will be debt free. It also helps in calculating the long term interest rate, credit utilization rate, monthly payments and the interest that can be saved by taking the step of consolidation. The calculator even helps you to consolidate the loan by yourself and helps you save on the fees that would have been charged by professional organizations.

Author has many years of experience in content writing. He is the most celebrated and acclaimed author in financial sector. Now he is writing for Debt Negotiators and providing information on debt consolidation loans and debt consolidation calculator.

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