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Consolidating Debt - How To Get The Lowest Interest Rate On A Debt Reduction
Or Consolidation Loan
By: Carrie Reeder
To get the lowest interest rate on a debt consolidation loan, you need to
research terms and rates. Lenders realize to remain competitive, they must offer
low rates. A difference as little as a quarter percent can save you hundreds a
year. The type of loan you choose can also have significant financial
repercussions.
Picking Your Debt Consolidation Loan
You have two options for a debt consolidation loan – secured or unsecured.
Secured loans are backed by property you own, typically your home. You can
choose to refinance your mortgage to pull out your equity to pay off your bills.
You can also use a home equity line of credit to consolidate your debt. With
both types of loans, the interest is tax deductible.
Unsecured loans, such as personal loans, have no collateral, so interest rates
are higher. You can expect to pay a couple of percentage points higher than
prime, depending on your credit score. You will also need to have a steady
source of income.
When you pick the type of debt consolidation loan you want, consider all the
financial factors. A secured debt will involve fees. You may also find that
interest rates are higher than when you first received your mortgage. However,
you need to remember their tax advantage. For large debts, a secure loan usually
is the best choice with a longer period to recoup the cost of fees. Unsecured
loans are ideal for those who don’t have property or have smaller debts.
Finding Lenders
No matter if you are looking for a secured or unsecured loan, the principles for
finding a lender are the same. Start by requesting quotes and terms from several
lenders. You may be surprised to find a lesser known lender offers far better
rates than national financing companies. Also, use the internet to speed the
process by requesting information online.
Besides rates, request information on fees – both up front and any early payment
fees. This information will help you determine the true cost of the loans.
Once you have found a few potential lenders, investigate further for discounts
and customer service. You may find a lender who offers discounts for applying
online or being a first time borrower with them. If all factors are the same,
select the lender that you feel most comfortable with and is easy to contact.
About the Author:
See my recommended Debt
Consolidation Companies online. Carrie Reeder is the
owner of
ABC Loan Guide, an informational website about various types of loans.
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