A guaranteed debt consolidation loan has requirements |
By David Pilley on July 6, 2011
.jpg.aspx) The word “guarantee” means a promise of a particular outcome or condition. A guarantee means something will perform for a specified length of time or it will do what it is, well, guaranteed to do. With a guarantee, you hope the guarantor does not hornswoggle you (a fun synonym for swindle or cheat). With debt consolidation, it is difficult to find a guaranteed loan that solves all your problems. The only guarantee the loan might have is a lower interest rate than most of the rates on your credit cards, but the loan only works if you have the ability to make timely payments.
To guarantee yourself a consolidation loan that will work, it needs to be a secured loan. Having a secured loan means the lender will get a proper payment back, whether it be in cash or some of your property. There is obvious risk involved with a secured loan, especially if the property being used as collateral is your home. However, if your goal of getting a consolidated loan is a lower interest rate, the only surefire way to achieve this is to get a secured loan.
The two most common types of consolidation loans are home refinance and a home equity line of credit. The benefits here are one interest rate to keep track of (again, an interest rate lower than most of your credit cards) and one principal amount to track. Merging all of your credit card debts to pay one check a month may be much easier to handle than writing ten separate checks in every thirty-day span. Loss of equity and/or foreclosure are possible outcomes if you don’t make payments on the loan, so it is imperative that 1) you own your home and have equity, and 2) you are able to pay before considering either of these loans. You also need a good credit score to be approved. Most banks and lenders will approve a consolidation loan if your credit score is at least 620. Anything lower, and you will be considered a risky customer, meaning a higher interest rate could be used as a safeguard, defeating the main purpose of you getting a consolidation loan in the first place.
If this doesn’t work, you may consider the services of a debt management program. Here, counselors will give you budgetary advice in order to handle your current debt. There may be consolidation or settlement options offered through the program, and your counselor may work with your creditors in order to lower individual credit card interest rates or determine a portion of each debt to pay. While nothing is an absolute guarantee or panacea to your debt, you can be assured that there are people out there who can help get you on the right track.
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