Debt consolidation loans are great when your financial situation is not looking so well. Requesting a debt consolidation loan can make your life easier because you will get to have a better control of your finances and debts, to some extent.

But is it the safest or the only method of dealing with debts? We will present the top alternatives for debt consolidation loans and discuss whether or not they are worth your time.

Details about Debt Consolidation Loans

This type of loan is unsecured, and it’s used to pay many unsecured loans. In other words, you use one loan to pay two, three or more creditors at the same time. You will not have to worry about skipping a payment for a loan or not paying on time. Here is an example:

If you have to pay a certain debt and multiple credit cards for a total of $10,000, you will have to pay each debt individually. In other words, besides 2 or 3 monthly payments, you will also have to pay the interest rates for those loans.

With a debt consolidation loan of $10,000, you will have only one monthly payment and one interest rate. This way, you will be able to pay them faster and without fail.

Not only that, but people prefer using debt consolidation loans for another reason. This financial service will make your debts easier to pay because it simplifies your repayment system (how you pay), so you won’t have to worry about skipping a reimbursement or not paying on time.

It is a great tool to use as long as you are organised.

This is why most people prefer this method. However, you will need to have a positive credit history if you want your request to be accepted by most lenders.

Also, you can try the following alternatives.

Debt Agreement

If debt consolidation loans are not right for your situation, a debt agreement might be the thing you are looking for. Your debts will be combined into one, and you can propose to your creditors how much you can pay monthly. There are a lot of advantages with this method.

You may have to pay less every month, and the interest rates can be lower. Besides that, you will have to worry about one debt instead of four, for example. Be careful though as they may refuse your request, so it is in your interest to have a positive credit history.

Besides a positive credit history, you will need to prove that you are capable of paying this debt every month. That means that you need to make a good impression on your creditors. Always come prepared with the necessary documents and discuss politely.

And remember, if a creditor asks why you missed the payment on a loan or paid two weeks later, tell him/her the truth.

Refinancing Your Loan

A great alternative to debt consolidation loans is refinancing. If you have a loan with a high-interest rate and you can’t manage it, you can try to modify its interest rate. You can talk to your lender about this or go to another financial institution.

Be careful though, because transferring a loan from one lender to another can be tricky. You will need to get informed on this sort of operation, and you will need to pay a couple of fees like the exit fee, entry fee (for the new loan) and other costs for documentation, for the service, etc.

Get a New Loan

If you have many debts to pay and debt consolidation loans are a “no,” then you can try applying for a new loan. With this new loan, you can pay your debts or at least reduce their number. Search the market for the best loan you can find that doesn’t have a high-interest rate or too many fees.

Be careful though that this method can spiral out of control and you will be doing this operation every time you have multiple debts.

Personal Insolvency Agreement

It is similar to debt agreement but all the conditions, loan term, interest rate, taxes, monthly pay, etc. are set in a contract made between the creditors and you. All the debts are mixed into one, and together with all those conditions, you propose to your creditors this new plan of payment.

Again, they might refuse your request so be ready with a plan B. If they accept, you may just solve some of your financial problems, for now.

In the end, it is all up to you. Are your debts that big? Does the interest rate affect your economy that bad? Is debt consolidation the only method you can use for your situation? While debt consolidation is a great service to use, it may not be the best.

The chances are that you may get more out of a financial advisor than going by yourself at a lender and asking for debt consolidation.

Conclusion

When it comes to debt consolidation loans, we recommend contacting us for more information and professional guidance with no effect on your credit file.