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“No lender should charge you upfront before you get the loan … A debt consolidation loan can wipe the slate clean and allow you to start fresh with zero balances on credit cards and other credit commitments.
and you certainly shouldn’t send money with a wire transfer or prepaid card,” Detweiler cautions. Although it may be tempting, avoid using your newly cleared accounts to shop or manage household expenses.
However, home equity loans for debt consolidation can be risky, as your home may be foreclosed on if you can’t pay your loan.
“The danger is if you eat up a significant part of your home equity,” says Gerri Detweiler, education director of business credit website
You will go through several steps to apply for and receive a debt consolidation loan.Once you know how much you can realistically allocate to paying down your debt each month, you can use the amount to determine terms for your loan.The amount you pay on your debt consolidation loan each month will vary depending on the amount you borrow and how many years you will take to repay it.While unsecured debt consolidation loans can be easier to obtain and more convenient than secured debt consolidation loans, they generally have higher interest rates, so they are more expensive to pay down than a secured debt consolidation loan.Getting a debt consolidation loan is a major financial decision and one that shouldn’t be taken lightly.
For the length of the introductory period, you can make payments to reduce your balance without accruing interest. To avoid missed payments, penalties or default, you’ll need to create a budget that allows you to make payments on your debt consolidation loan.