Consolidating Debt - How to Get
The Lowest Interest Rate on |
By Carrie Reeder |
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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.
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.
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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