When you have multiple credit card balances and more than one loan, managing them can be tedious and they can become your financial burden if you don’t manage them properly. One of the easiest ways to make sure you make monthly payment on time in order to avoid any late payment and extra financial charges is to combine all debts into a debt consolidation loan and make single monthly payment at lower interest rate. There are many consolidation loans being offered in the market, but you have to spend some times and efforts if you want to find the best loan. Here are three simple tips, which you can use as references when choosing the best loan to consolidate multiple debts.

Tip #1: Search & short-list consolidation loans

All consolidation loan offers may look good at their advertisements. You have to review the details in order to find the best loan among them. Watch out for offers with high number of fees or loans with interest rate that look too low to be good. Most often, loans with very attractive interest rate have an expiry date, the time when the rate will be reset to standard or higher rate, making you pay more in long run. You have to ask for the details that include all fees involved. There are always hidden fees that are not mentioned in advertisement, but they are printed in the loan agreement.

Tip #2: Avoid debt consolidation loan with super low monthly payment

As mentioned earlier, all loan promotions come with an expiry date. You may attract to the super low monthly payment advertised, but it may cost you more later on. Due to high competition in the loan market, lenders may offer super good consolidation loan packages that allow you to pay super low monthly payment with a small printed asterisk terms and conditions that you may not notice about it. All those low monthly payments mean more opportunities for a debt consolidation company to charge you more, in term of interest. If you read the terms and condition carefully, you will notice that the interest rate will jump back to standard interest rate after the promotion period. In fact, these monthly payments are made lower by extending the loan repayment period, the longer your loan tenor, the more interest you have to pay. So, you save the interest for very short promotion period, but pay more in the long run. Therefore, you should avoid consolidation loans with super low monthly payment when searching for the best loan to consolidate your debts.

Tip #3: Pay particular attention to the variable interest rate debt consolidation loans

Many consolidation loan offers have variable interest rates. Normally, the initial interest rate will be set to super low to attract new customers. The loan officers want to you think that the low interest rate will stick around for a long time by bringing your attention to the super low interest rate when they explain how their offers will benefit you if you sign up with them. But, in reality anything goes with a variable rate loan, there is no guaranteed and you may be surprised when suddenly stuck with a much higher interest rate. It is better to get a loan that you know with constant interest rate than having to worry that you could be charged for the worse on any given day.

Summary

It is a good option to consolidate multiple debts into a loan for ease of finance management while enjoying a better interest rate. But, not all consolidation loans are as good as they are advertised. You should follow the three tips mentioned above to guide you on searching for the best consolidation loan.

    Posted in Debt Consolidation from Investor on 31. Mar. 2010