There are thousands of people who borrow quick loans in Singapore from different financial institutions or licensed moneylenders. In order to ease your debt, many companies have started to offer a debt consolidation loan.
Firstly, approved debt consolidation companies cannot help to reduce your debt amount. They can only manage your debts. In simplest terms, debt consolidation loan allows individuals to pay a certain amount to the consolidation company instead of paying different amounts monthly to various debtors.
When debts pile up, it is strenuous for individuals to manage everything without overspending. You cannot spend your entire income on debts. This is where debt consolidation companies come in and assist you.
Below are the different types of debt consolidation loans.
Home Equity Loan
As the name suggests, your home equity, i.e. the total value of your apartment is used as the security for a home equity loan. To be eligible for home equity loans, you must have a house with a fair market value as well as a good credit score.
Though home equity loans are associated with lower interest rates, they put your home at stake. This type of loan is only suitable for homeowners who are ready to bear the risk of home foreclosure. The home equity loans can be used as debt consolidation loans.
Credit Card Balance Transfers
In this type of debt consolidation loan, the individual has to pay the balance pending on different credit cards through one card. You select a credit card that offers the lowest interest rate and transfers the due balance monthly onto this card.
It is important to note that low-interest rates are promotional offers introduced by the particular credit card company for a specific period. It can last from six months to a year. Once the promotional offer expires, you will have to pay the regular interest rates. If you want to use credit card loans as a debt consolidation loan, you must have a card with a high credit limit.
You can turn personal loans into debt consolidation if your loan amount is good enough to cover all the due payment. Personal loans must be paid within the given period, plus they are unsecured loans. You can only use personal loans as debt consolidation if you have a good credit score. Though some financial organizations allow personal loans to people with bad credit ranking, they charge a heavy interest rate. Therefore, personal loans are only recommended for people with good credit scores. Personal loans can be used to consolidate all your debt balance amounts, but it might not prove beneficial in the long run.
Debt consolidation loans are designed explicitly by licensed moneylenders and banks to help users combine their balances and pay them quickly. These loans involve a lower interest rate. Debt consolidation companies can help you pay a smaller amount each month, but it increases the repayment period and interest rate.