Low Interest Debt Consolidation Loans

Low interest debt consolidation loans were once how much debt was consolidated, but I don’t think it is the norm today. Debt consolidation loans come in 2 types secured and unsecured. Secured loans require collateral to back the loan and an unsecured loan or signature loan just requires you to sign the loan papers and the money is yours.

First of all, unsecured loans rarely have low interest rates. There is a trade off for not having to have collateral and a higher interest rate is it. Also, these days it is difficult to get more than about $1,500 in unsecured money without a really high credit score. It is possible to open a credit card with a low introductory rate to consolidate debt. This rate can be as low as 0% and last as long as a year. If the account is not paid off within the introductory period, it will go up to its regular interest rate which range from 15% to 30%. The limit on the account could range from $3,000 to $15,000 or more depending on your credit and your income.

The most common type of low interest debt consolidation loan is what is known as a HELOC or home equity line of credit. This is a secured loan and you will need to own a home and have good credit to qualify for this type of loan. And this is if you can find a lender who will to lend money right now. Some of them have a pretty tight grip on the purse strings at the current time. The interest on this type of loan is tax deductible and you will get a much lower interest rate than most major credit cards offer. This type of loan requires a home closing, so there will be costs added to the loan for that.

This sounds pretty good up until now. What happens if you are not able to make your payments? When credit card payments are not made, they fall behind and soon your get collection calls…lots of collection calls as time goes on. And there is a possibility that you could be sued for the money. Without you having a job, there isn’t much that the lender can do except report you to the credit bureau.

Now, if your debt is in the form of HELOC, the outcome will be different. Because, this is a mortgage and a lien was placed on your home, the lender can start foreclosure proceedings. The bottom line here is that if you are going to finance your debt with your home, you better give it a lot of thought.

If you are looking for a way out of debt that consolidates your debt and has a low interest rate, you may want to talk to a nonprofit credit counseling company. You can place all consumer debt in this program. Your interest rates will be lowered (usually to 10% or lower). You will only have to make one payment each month. What is even better is there is no home ownership or credit check required. With a debt management plan, you can be debt free in 3 to 5 years.

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