Unpaid monthly payments will damage a person's credit history. Even though you
may plan to make double payments the following month, the missed payment will
show up as a negative, and may compromise your future ability to borrow money or
extend your credit limit on existing accounts. That is why it is important to
make every effort to pay your bills on time. Sometimes a creditor will let you
make partial payments temporarily for extreme conditions, such as disability or
unemployment. Still, you will have to find sources of funding that will help you
make those credit card payments and either avoid a negative credit history or
prevent your financial standing from damaging reports if the bills remain
outstanding.
A debt consolidation loan may be the answer to your problem. Although a loan
will not automatically reduce your debt load, it can provide smaller payment
options that will ease your financial strain and help you stay current with
monthly balances. A consolidation loan could provide several benefits toward
paying off your credit card debt in a timely manner without defaulting and
hurting your credit reputation.
1. Shop around with different lenders to see if you are eligible for a debt
consolidation loan. The internet is an incredible resource for debt management
and offers a wealth of information if you know where to look. One such resource
is www.banklady.com. Potential lenders will consider several things to see if
you can get a loan of this type, including the amount of debt you currently owe
and the monthly payments that are due for each one, your household income,
previous credit history, paid items that were financed-like a car or a boat, and
your ability to make monthly payments for the proposed consolidation loan.
2. If it appears that you are eligible, you can submit an application for the
debt consolidation loan. You may be able to do this from home at your computer.
This would be helpful if you need to consult records and pay stubs rather than
bring them all to the bank for copying. On the other hand, making an appointment
with a loan officer to review some of the necessary records will give you the
opportunity to ask questions and clarify information. Make sure the application
is filled out correctly and completely, as missing information could delay an
answer.
3. After discussing figures with the loan officer, make sure that you can afford
the debt consolidation monthly payment. There's no point in refinancing if the
new payment will still be hard to meet. Try to get the due-date set to a day
each month right around payday, so you can make the payment before spending that
money on other things. Payroll withdrawals are another option that will
automatically deduct the monthly payment from your paycheck before you ever get
a chance to see or spend that amount. Ask your lender if this option is
available, and if you use it, be sure to deduct the payment amount from your
check register each month.
Should everyone in financial trouble take out a consolidation loan? Not
necessarily. There are potential drawbacks to consider, so do your research
before making the decision to apply for the loan.
1. How long will a debt consolidation loan extend your current balances? If your
present credit card balances could be paid in full within three years by making
regular payments as scheduled, is it advisable to refinance your debt and extend
the loan another three to five years? You could end up paying far more over the
life of the loan than you would by keeping current with regular debt payments.
Compare the two to see if refinancing is in your best interests.
2. What will be your new interest rate? A debt consolidation loan generally is
an unsecured loan, which means you may pay a higher interest rate than you might
for a secured purchase, like a new car loan, for example. If your current credit
card debt interest averages at six percent, and your new loan interest will be
nine percent, how much more will you end up paying until the balances are paid
in full?
3. Consider upcoming circumstances. For example, if your financial crunch is
temporarily due to having a child in college, and he will graduate in a year, is
there a way to make regular payments during this time by tightening the
household budget rather than by refinancing a loan? You might be able to use
your job's year-end bonuses, an unexpected windfall, or a postponed vacation as
a source of revenue to help you meet the present payment schedule, which could
save money associated with the costs of a loan application, a longer payment
scheduled, and higher interest.
These are some of the issues that typically come up when people think about
refinancing their credit card debt to protect or clear their credit records.
Give careful thought to the pros and cons of a debt consolidation loan before
switching debt balances to a new lender.
Author Bio
This article was written by Katie Morgan. If you have less than excellent credit
and are curious about your options, you'll find everything you need to know
about credit or obtaining a loan right here in one location. Reproductions of
this article are encouraged but must contain a link pointing back to www.banklady.com
Article Source: http://www.ArticleGeek.com
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