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Low Interest Debt Consolidation: Does It Work?

By: Michael Millington

Low Interest Debt Consolidation for Consumers

Debt consolidation can help turn multiple debts into one singular financial obligation. While other forms of debt relief can attack the debt directly, consolidation only reorganizes your debt. The main concern after consolidation is whether you can make payments on your loan on time. However, there is another issue that many people do not consider when it comes to debt consolidation: interest rates. Should the interest rate of your consolidation loan be larger than anything the loan pays off it can defeat the purpose of the loan. Here we will discuss low interest debt consolidation and what it takes to make the most out of such a loan.

What is a Low Interest Debt Consolidation Loan?

A low interest debt consolidation loan is a debt consolidation option that has lower interest rates than your debts. In order to get the best effect from debt consolidation, the interest rate must be less than the rates of your debts. Should you consolidate your debts with a higher interest rate, you would end up paying more money in the end.

Is There a Catch to Low Interest Debt Consolidation Loans?

In order to acquire a low interest debt consolidation loan your credit would need to be adequate. The higher the credit score, the lower the interest rate. In many instances, those who look to consolidate their debts do so well after it affects their credit. Should you have the credit to qualify for a loan, it’s also possible you have the ability to pay your debts off yourself.

What Are The Alternatives?

If you don’t have the credit for a low interest debt consolidation loan, there are other debt relief methods you can use. Debt settlement doesn’t require a credit check and can lower the amount of debt you have to settle. The time it takes to resolve a debt through debt settlement is much longer. However, debt settlement might be more beneficial for saving money.

Bankruptcy is viewed as a last resort in terms of debt relief, but it can be helpful in the right situation. If you do not have the credit for low interest debt consolidation or the ability to pay a good portion of your debt through settlement, bankruptcy is what's left. You have the ability to eliminate your debt completely with bankruptcy. While this will put an immediate and long lasting strain on your credit rating, you will no longer have an obligation to pay off these debts.

Credit counseling provides you with information about your debts as opposed to dealing with them directly. In a credit counseling program, you are paired with a counselor who can analyze your debt and give you the best options to deal with it. Your counselor can also suggest a debt management plan to help. A debt management plan has the ability to remove fees and charges from a particular debt, allowing you capability to pay off your debt.