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Digital News Report – Debt consolidation loans are used to consolidate multiple loans into one obligation. The first step in the process involves assessing your personal situation. Can you negotiate a lower rate by calling your creditors?
It is important to determine how long it will take to pay-off all of your obligations. Borrowers need to get a realistic idea of how long it will take to pay down credit cards, student loans, car loans and other non-mortgage debt.
Consider all of your options. Some advisors may recommend refinancing the consolidator’s home – others may not. There may be tax advantages, but the borrower will be putting their home up as collateral. Check with a financial advisor before making a decision.
A financial advisor may recommend borrowing against a 401(k) or other retirement fund. There are some obvious pitfalls and advantages to doing so. The advantage is lowering the interest obligation but the disadvantage is losing the retirement money.
The goal should be to pay off the loan as quick as possible with the lowest interest rate. In some instances, a long-term obligation is preferable.
Compare the rate so your local banks and credit unions. A poor or bad credit score could trigger higher rates, but the loans may still be available. Some banks will give their current deposit-customers an advantage.
By Tina Brown