Consolidation loans is a loan that is taken out to consolidate all your unsecured loans into a single payment. Most debt consolidation companies will help their customers to lower the interest rate and reduce the monthly payment amount. The purpose of consolidation loan is to help you not to miss the monthly payment. Many people find themselves unable to remember the due date for each of their credit cards so they forget to make payment promptly. This caused their accounts to be handed to the collection agency.
If you are tired of receiving the collection calls, you can seek help from a debt consolidation company. instead of making multiple payments, you now only make a single payment to the debt consolidation company. The debt consolidation company will forward your payment to each of the credit card company until the amount of borrow on each card is fully repaid. It is possible to fully repay your credit card debts in 3 – 5 years if you keep up with the monthly payment every due date.
Personal loan is different than consolidation loan in that it is an unsecured loan offered by a bank or financial institution to a borrower. You can apply a personal loan to consolidate your credit card debts but it is not wise to do so. For example, you can use the funds from the short term loan to repay three of your credit cards in full. The downside of doing this is that you have to pay a high interest rate.
Personal loan is usually applied by people who need a sum of money for a certain expenses. The funds you borrow from a personal loan can be used for making a large purchase such as home improvement, and holiday trip. Personal loans generally offer a loan amount of up to thirty to thirty five thousand dollars.
When shopping for personal loans, you must always use the online comparison tool to perform comparison on the interest rate from different financial institutions. Personal loans will charge a prepayment fee so you should ask your lender if you are considering to repay the loan in full earlier than the loan period. Personal loan has a fixed loan period on which all your debt will be fully cleared if you have been promptly making repayment every month.
It is important to read the entire loan agreement and fully understand what it is saying before putting down your signature regardless of whether you are signing up for a debt consolidation loan or personal loan. If you don’t read the loan agreement, you might miss some important details and don’t know your full financial responsibility to the loan. It is best to seek help from someone experienced in the loan field if you are not familiar with some terms in the loan agreement.