A person burdened with several loans running concurrently has several balls to juggle at the same time. Not only is the thought of so much money to repay a very worrying one, but the hassle of keeping track of different repayment dates and answering lenders’ calls also takes its toll. In such a situation, a debt consolidation loan can often be a convenient solution, in which a single consolidated loan is taken, and the multiple smaller loans are closed off. Although debt consolidation is something that a person can do by himself too, by speaking to a lender directly, usually the person seeking a debt consolidation goes to an agency which facilitates the process. While selecting a debt consolidation company, there are a few things one should keep in mind while making the selection.
Let us see what some of them are.
The rate of Interest – A reduced monthly repayment amount on account of negotiated lower rates of interest is the biggest advantage that a debt consolidation offers. The company doing the negotiations for debt consolidation must be able to provide the highest reduction in rate so that a lower monthly repayment is made available.
Tenure – This is one of the sticky points of a debt consolidation loan, because if there are five loans to be replaced, and two of those five loans are scheduled to close after one year, then the consolidation loan is likely to have a tenure of greater than a year. The debt consolidation company that offers the smallest increase in tenure should be opted for. Most debt consolidation reviews mention increased tenure as one of the cons of a debt consolidation loan, but if properly negotiated, it can be turned into an advantage as well.
Banking Relationships – The company providing the debt consolidation loan would concurrently need to speak to all the current creditor to design an overall consolidation package, and so this company would need to have good working relationships with all banks so that negotiations can be conducted in a friendly yet useful way.
Fees – If a person is negotiating his debt consolidation himself, it is possible that the very best solution might not be worked out because of the lack of his experience and expertise in this field. This expertise is exactly what a debt consolidation company offers, and that is why it charges fees. This could mean a one-time lump-sum amount, or it could be a percentage of the consolidation loan provided. A comparison of fees charged by different debt consolidation companies is essential.
Average Reduction of Liability – The main purpose of debt consolidation is to reduce the multiple loan amounts. Apart from the expected reduction in the rate of interest, one more expectation is that there would be a reduction in the total loan liability. A good debt consolidation company can negotiate an average reduction of as much as 30%.
Making a critical comparison of the above parameters can help in selecting the best debt consolidation company.
