Consolidating Debt - How To Get The Lowest Interest
Rate On A Debt Reduction Or Consolidation Loan
by: Carrie Reeder
To get the lowest interest rate on a debt
consolidation loan, you need to research terms and rates. Lenders realize
to remain competitive, they must offer low rates. A difference as little
as a quarter percent can save you hundreds a year. The type of loan you choose
can also have significant financial repercussions.
Picking Your Debt Consolidation Loan
You have two options for a debt consolidation
loan – secured or unsecured. Secured loans are backed by property you
own, typically your home. You can choose to refinance your mortgage to pull
out your equity to pay off your bills. You can also use a home equity line
of credit to consolidate your debt. With both types of loans, the interest
is tax deductible.
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Unsecured loans, such as personal loans, have no collateral, so interest
rates are higher. You can expect to pay a couple of percentage points higher
than prime, depending on your credit score. You will also need to have a
steady source of income.
When you pick the type of debt consolidation
loan you want, consider all the financial factors. A secured debt will involve
fees. You may also find that interest rates are higher than when you first
received your mortgage. However, you need to remember their tax advantage.
For large debts, a secure loan usually is the best choice with a longer period
to recoup the cost of fees. Unsecured loans are ideal for those who don’t
have property or have smaller debts.
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Finding Lenders
No matter if you are looking for a secured or
unsecured loan, the principles for finding a lender are the same. Start by
requesting quotes and terms from several lenders. You may be surprised to
find a lesser known lender offers far better rates than national financing
companies. Also, use the internet to speed the process by requesting information
online.
Besides rates, request information on fees –
both up front and any early payment fees. This information will help you
determine the true cost of the loans.
Once you have found a few potential lenders,
investigate further for discounts and customer service. You may find a lender
who offers discounts for applying online or being a first time borrower with
them. If all factors are the same, select the lender that you feel most
comfortable with and is easy to contact.
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