How can debt consolidation loans help you?

There may be times when you cannot avert your debt. You may have been managing your debt quite well when you are suddenly faced with a situation that requires you to shell out extra cash rather unexpectedly. In the majority of cases, there are two reasons that may cause you to fall behind on payments – (i) medical emergency and (ii) job loss. If you have multiple debts that needs to be addressed and you are finding it difficult to manage these debts, then debt consolidation may be your answer.

Debt consolidation allows you to replace your various debts with a single debt account. You can consolidate your debts with the help of a debt consolidation consultant who will work out a suitable debt consolidation program for you. Debt consolidation loans will allow you to enjoy reduced interest rate and consequently lower your monthly payments. These loans can be of 2 types, namely: secured debt consolidation loans and unsecured debt consolidation loans.

When should you opt for debt consolidation loans?
If you are faced with any one of the following situations, you should attend to your debts without further delay.

1. If you have missed payments for the last 2 to 3 months
2. Creditors have been calling you up for their money
3. You are receiving calls from the collections agencies.
4. You want to enjoy lower interest rate and lower monthly payments
   

Secured versus unsecured debt consolidation loans
If you are planning to take out a secured debt consolidation loan, you will be required to have collateral. The collateral acts as a security against which the loan is taken out on. In most of the cases, your house is used as the collateral. The interest rate attracted by the secured debt consolidation loan is usually less compared to an unsecured debt consolidation loan where you do not use any security and the interest rate is, therefore, much higher.

Secured debt consolidation will allow you to enjoy better rates but should you fall behind on payments, your creditor will take away your home. So, if you are opting for a secured debt consolidation loan, make sure you stay current with your monthly payments.

Article by : Debtcc community member
Website: Debt Consolidation Care

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Am I ready to buy a home?

You have decided that now is the time you would like to purchase your own home when prices of houses have dropped due to the current worldwide economic crisis, but are you really ready to buy that dream home now?

Here are some factors to consider before purchasing a home:

Income

Do you have a reliable and steady source of income, namely a job? Have you been employed on a regular basis for at least 2 – 3 years?

Credit Health

A credit check will be done on you once you apply for a home loan. Do you have a good credit record? Do you pay your bills each month and on time?

Finances

What are your finances? To find out, do a budget. The budget will tell you what money is coming in and where it is going. It will tell you what are your needs, wants and can afford.

Other Debt

Do you have any outstanding debt like car payments or personal loans? Now would be a good time to consider debt consolidation. It makes no sense saving up for a deposit (with low interest rates) for a new home when you are being swamped with high interest rates on your current debt.

It would be wise to pay that debt off first, and save yourself money (on interest payments) in the long run. Have a look at your budget. You may have to make some sacrifices and any unnecessary spending will show up in this budget. Use that money towards your debt payments.

Home Affordability

From your budget plan, you will be able to see what money will be available for buying a new home.

You will need to pay a deposit of between 10% – 20% depending on your criteria and the bank that will grant you the loan. In addition to that, you will need to pay home loan costs. The home loan costs are: transfer fees, bond costs and the initiation fee.

It was announced this week that 3 of the top banks in South Africa are now offering 100% home loans.

Once you have bought a home, other costs will be incurred like home insurance, household insurance, security, home improvements, rates, water, electricity, etc.

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