Different types of debt consolidation loans
Types of debt consolidation loans – The South African economy through various financial institutions has provided various avenues for individuals and families to secure finance for pressing needs. The abundance of these credit and micro lending firms implies that one can obtain finance or credit from different institutions and continue servicing them as separate accounts. The implication of such an arrangement is that is its very easy to default on repayment because the accounts are too many to effectively manage. In order to manage multiple debts with ease and avoid complicating your financial situation, there are different types of consolidation loans which can assist in this regard. Some of these consolidation loans include secured consolidation loan, home equity loan, transferring balance and retirement accounts.
The secured consolidation loan is ideal for borrowers with poor credit report. The interest on this loan is low as you have to back it up with security deposit. Therefore if you default on payment, your property can be repossessed by the creditor, so collateral cushions the risk on the part of creditors.
Home equity loan is for those with blemished credit report. You can get this loan on low-interest rate making it easier to consolidate your high interest debts. This loan application must only be done if there is enough equity in your property.
Transferring balance happens by applying for a new credit card with introductory offer. With poor credit, you may not apply for a new card, you therefore have to find a consigner with excellent credit rating who can help you get another credit card. The introductory offer cards usually have low or zero interest rate. Therefore you can transfer your high interest balance to this introductory offer card. You can lower your monthly payments once you transfer your high interest balance to this new card.
Retirement account is simply taking out a loan against your retirement account. If you withdraw funds from your retirement account before you attain the age of 59, you may face a penalty. However it’s necessary to eliminate your high interest debts. Once you pay off your debts, you can continue contributing in your 401k plan.
The above are the debt consolidation debt options.