Debt consolidation refers to taking one large debt to pay off many small ones. With multiple loans, typically you end up paying higher interest rates overall, in addition to other associated fees. A single payment each month is more convenient than multiple payments. It is also important to understand that the type of loan taken largely influences the interest rates to be paid. Personal and unsecured loans like credit cards attract interest rates between 19% to 29%. Mortgages and other secured loans have lower interest rates and are well-suited for debt consolidation. We have a team of experts with many years of experience arranging debt consolidation loans in Aurora, and they are available to discuss your needs.
Benefits of Debt Consolidation Loans
Many of the people who find it difficult to keep up with multiple monthly loan payments can make use of debt consolidation loans in Aurora. With a registered mortgage, a homeowner may borrow from banks and private lenders at lower interest rates. Registered mortgages are a less risky type of loan for lenders since they can recover their money by selling off the property in case of a default. With this type of loan you can get more than $20,000, but a credit card will only allow you to borrow a few thousand dollars.
Common Reasons for Debt Consolidation
People have many objectives for consolidating their debts among them:
- Reduced Interest Rates: Mortgages generally charge lower interest rates compared to other types of credit.
- Boost Credit Score: Missing credit card and loan payments could gravely hurt your credit score. With a single mortgage to pay each month, it is unlikely that you would miss a payment. It is advisable to take a debt consolidation loan that is simpler to keep track of.
- Lower Monthly Fees: You can take a debt consolidation loan for a longer period in order to reduce monthly payments.
Methods of Debt Consolidation
You can either take a new mortgage, a second mortgage on the home or simply refinance the existing mortgages.
Mortgage Refinancing
This is best done when the current mortgage bears higher interest rates than those for a replacement mortgage. There will likely be fines for ending a mortgage early. The decision to refinance should only be made if after factoring fees, penalties and total interest, the new loan is cheaper than the existing one.
First Mortgages
These are useful if you do not have an existing mortgage. Many lenders will lend to homes with sufficient equity. The first mortgage on a property is less risky than other types of loans since the full value of the property is used as collateral.
Second Mortgages
These are suitable if there is an existing mortgage on the home. You can only get a second loan once lenders ascertain that there is enough equity in the home. You must also pay higher interest rates than for first mortgages. With a second mortgage, you can pay off other expensive loans.
Private Lenders for Debt Consolidation Loans
Banks and institutional lenders offer loans at low interest, but unfortunately, not everyone qualifies. Those seeking to consolidate debts usually have a history of non-payment and are often trying to prevent the situation from escalating. To get a bank or credit union loan, you need to have a credit score of upwards of 550 and no less. This is a measure of creditworthiness but it locks out many in search of affordable loans. Many loan seekers are left to seek the aid of private lenders who are willing to approve them despite being previously rejected by institutionalized lenders.
The private lenders must protect themselves from the risk of lending to individuals with poor credit. They do this by charging higher interest rates and leaving the high associated fees to the borrower. Our experts have a vast network of such private lenders, to whom they can turn when our clients are in need of loans. We can get multiple quotes from the lenders in our network and help clients understand all fees involved to ensure you pick the offer that will eventually save them some money.