Consolidating Credit Card Debt? Loan Options to Review

There are many types of credit card debt loans that can assist you consolidate your financial obligations. It is important to research and be on the look out for high rate and fee loans.  Many debt loan companies know you are in a vulnerable and only some companies have good business practices. When considering your options, research the type of loan you are securing and the company you are working with.

Debt Settlement Loan

With debt settlement, you, or your new lender will contact your current lenders to negotiate a one-time payoff. The payoff will be smaller than your totall owed principal. The lender may be willing to pursue this option in order to secure their funds immediately without much hassle. Often, a debt settlement lender will be able to negotiate lower pay offs than you. The debt settlement company will give you a new credit card debt loan for the total amount they settle for. You will then pay them one monthly payment, but it will usually come with a high interest rate.

Debt Refinancing Loan

Refinancing is paying off one loan with another loan at a lower interest rate. Some credit lines will have high interest rates due to the nature of the credit. For example, many retail store cards have high interest rates. Refinancing for a lower interest rate can decrease your monthly payments and the total cost of the loan over time. Be aware of any prepayment fees or penalties on your existing lines of credit before refinancing. Consider refinancing only your high interest rate loans with a new loan because if you already have a good rate, it is better for your credit score to pay off the line of credit under its original terms.

Debt Consolidation Loan

Straight debt consolidation loans are provided by lenders who pay off your existing debt with a new loan to you. Typically, debt consolidation loans involve debt settlement, debt refinancing, or both. In some cases, though, simply consolidating has benefits. For example, it can be beneficial because it will put a stop to collections calls or can also pay off your existing debt. It is also an option is you are looking to avoid bankruptcy.

High Risk Personal Loan

High risk personal loans are extended to individuals with bad credit. The loans are evaluated based on financial hardship. High risk personal lenders assume a large amount of liability in issuing these loans and as a result, they often issue the loans with higher interest rates.  You may be eligible for this type of financing if you have suffered a recent job loss or have had a medical emergency,divorce or have been involved in a large family dispute. Financial hardship does not typically describe someone who is in debt due to bad spending habits. If your debts are a result of mismanaged finances, a high risk personal lender may not see you as a good potential candidate.


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