You can’t predict the business landscape! It is dynamic, competitive, and challenging. Whether you are an independent business owner with an established business or a start-up entrepreneur, you will require funds to run your business. And there will be times when you might need a new loan to pay your debt amount. It is here that you might want to consolidate your business loans.
When you consolidate the entire business loan, you can pay the increased interest credit card payments. You can make use of this loan for other purposes as well, such as paying
- Medical bills
- Utility bills
- Income tax
- Payday loans
- Student loans
- Collection bills
Today, there are various lenders and financial institutions that make it possible for you to know and opt-in for debt consolidation loans. To know more, you can check out NationaldebtRelief.com. Discussed below are four essential ways to consolidate your debt.
- The debt consolidation loan
This loan is helpful for people who have slightly lopsided credit and needs funds to pay their outstanding business and personal bills. The loan can be sanctioned by banks, companies’ experts in debt consolidation, and credit unions. The ultimate objective of this loan type is to merge all the business debt to minimize the monthly financial stress. Debt consolidation loans vary from one lender to the other. Hence, you need to choose wisely. The significant advantage here is a reduced interest, which is lesser than what you are paying currently.
The repayment term is slightly longer, which ensures that you can repay the loan amount in a focused and not get confused with other bills. A debt consolidation loan is an ideal way to manage both personal and business finances. You can also add to your savings.
- Personal loans
There are start-up entrepreneurs who opt-in for personal loans, for consolidating debt. Akin to most loans, here also there’s a rate of interest, a stipulated payment date as well as the specified amount that needs to get paid each month. A loan is unsecured, and so you don’t need to opt-in for collateral. But it is essential to have good credit.
The best thing about personal loans is that you can make use of the funds in various ways, such as paying your bills or in home improvement costs. Some lenders will grant the loan even if you don’t have ideal credit. However, they might ask for collateral, a co-signer of the loan, or an increased interest rate.
- Credit card transfers
It is one of the common debt consolidation choices, where you can take all the outstanding bills on your credit cards and merge it in single card payment. It can enable you to streamline your funds. It is helpful if you are unable to tackle the high interest and manage the necessary payments for your debt.
To qualify for this debt consolidation option, it is essential to have an excellent credit backup! By opting in for a credit card transfer, an issuer can provide an introductory time, where you don’t have any interest. When you decide to take this route, it is essential that you have clarity on two things. First, the date when the introductory time ends and second, the rate of interest that is applicable going forward.
The objective with this debt consolidation type is to pay the maximum outstanding credit card balance, if not the entire amount. The challenge is to pay off as much as possible within that introductory time frame. Hence, every single payment you make all gets aimed at the principal amount instead of the rate of interest. There are times when a credit card transfer seems to be the logical way out. However, it involves one risk factor. When you have an excess debt on a single credit card, it can hamper the FICO score.
- Home equity loans
When you are planning to opt-in for this debt consolidation loan, you can make use of the house as your collateral. Generally, here also you need to have a stable credit history and backup. Also, the equity amount should match the criteria set by the lender. The benefit here is that you can have access to a loan amount, which comes with a lesser interest rate. In the majority of situations, the financial experts don’t suggest home equity loans, till such time you have a foreclosure.
Important things to remember
Based on the company or lender you are doing business; it is crucial to be aware of money management. The main reason is that many business owners and individuals tend to spend more. They also sometimes become very complacent about paying all the bills. And it all results in financial stress and lack of funds. Money management can help individuals and business owners understand the root cause of their debt. And this will enable them to not get in the same place again.
You need to know that debt consolidation pays off your entire loan at one go, for you to make monthly payments. It doesn’t excuse you of your loans. You still have to make the payments but over a longer time.
As you apply for a debt consolidation loan or a personal loan, be prepared for a credit check. Often companies and lenders carry out a credit check. To keep your credit in good shape, stop the extra purchases at least two months before you’ve decided to apply for a debt consolidation loan. Furthermore, refrain from applying for a new credit card. It is because many inquiries might negatively impact the credit score and can lessen your chance to apply for a loan when you need again.
It is essential to read and know the terms and conditions before you sign up for any loan. It is not a smart call to land up in unwanted financial stress, because of being unaware of the repayment terms and the interest rates. Instead of solving your financial problem it might make it worse. Always ask your queries and understand the debt consolidation process before you say yes to it.