If you are not willing to put your assets or retirement savings at risk but want to take out a loan to benefit from the perks of debt consolidation then you have two ways. Firstly, it is an unsecured debt consolidation; secondly, it is a credit card balance transfer.
If you made a decision towards an unsecured loan MoneyTopics recommends you to start from formulating certain criteria theconsolidation loan should satisfy. First, the interest rate that you expect to receive on your new loan should obviously be lower than what you pay on your current debt. Otherwise, it doesn’t make sense to consolidate loans to increase costs. Secondly, pay special attention to fees. It is hard work, we know, but try to find loans with no application fees and annual payments. Choose credit programs so that you minimize early termination fees, late payment fees and other penalties.
Along with all the benefits of consolidation loan, taking out an unsecured loan is quick as no collateral is required. You still can expect a fixed rate and repayment period that makes it for you quite easy to plan future purchases. As there is no property to secure creditors from default they charge higher interest in comparison to secured loans and prefer to loan people with good credit score. Moreover, the interest costs are not tax deductible.
Peer-to-peer loans.
This type of borrowing is on the rise right now because of it simplicity. It is worth considering as you get money from other people not from banks and it means that the interest rates are better than in case of traditional loans. Still an intermediator is a peer-to-peer credit company that watch the transaction. After you get a credit score (Check Here), you ask for funds on the loan platform where investors find your request. Generally the money is provided by several investors and to attract them you still need a reasonable credit score. The platforms, which are the largest in the USA, are Prosper and Lending Club.
Personal (Signature) loans.
Personal loans are widely used to consolidate debt. All the transactions can be done via the internet and a credit decision is made within a day and then you can be provided with a loan up to 100 000 dollars. The interest rate is generally fixed and repayment period varies from 3 to 5 years.
Advance Fee Loans.
Be careful with advance fee loans because if a company offers money asking to pay in advance it might be a scam. Moreover, no company can guarantee that you get a loan, but if it does, then it can hardly be a legitimate creditor.
Payday loans.
Never use it for consolidation for your own sake. It is a very risky form of borrowing money. Loans are given within several hours without any credit check and verification of employment history. The money is directly transferred to your bank account but they come at extremely high interest (300%-400%). Do not get attracted by the simplicity of the process. It comes at high price.