With the rapidly growing lifestyle, the necessities that people have required and their demands have grown at the same time. People nowadays want everything in their lives to fulfill their desire of comfort and luxury, and in some cases: they actually use their money on their needs.
For fulfilling the needs and demands of the people, some people opt for getting loans, credit cards etc.; however, it sometimes becomes extremely hard to pay off the loans on time and they become bad debts.
Further, to solve the problem of bad debts, some people attempt to make it easier by applying for a Consolidated Debt Loan. For those who are unaware about the ‘Consolidated Debt’ and the ‘Consolidated Debt Loan’, let’s provide you some brief.
The ‘Consolidated Debt’ refers to combining or joining the accumulation of more than one loan. For instance, one could have a loan for car, or for house, or education etc. So, all of these loans when combined together is referred to as ‘Consolidated Debt’.
Somewhat similar is the about ‘Consolidated Debt Loan’, but here, the loan is taken for paying off the old debts/loans. The reason behind getting a Consolidated Debt Loan is that the rate of interest, which is charged on this loan, is quite low as compared to the old loans. But, what would happen, if the same debt loan becomes a Bad Debt?
What people need to do first of all is to avoid getting any consolidated loans. As specified earlier, that the reason behind accumulation of so much in loans is the lifestyle that some people live.
So what could be done to decrease their outstanding debt? Some people need to change their living habits. People should spend only as much that is absolutely required by them, and should avoid extra expenditure. This goes to the heart of debt: Necessities Versus Luxuries
But, since, one is under the burden of Consolidated Debt Loan already, there are few ways which could help him to easily pay off the loans.
Go for shorter payback duration:
Paying off the debt loan would be really hard – if you go for a longer term duration of the loan. It is better to choose a shorter time duration for paying off the loan. Although the shorter time duration would make you pay higher EMI (Equated Monthly Installments) per month, it would prove to be helpful in terms of amount of interest. When the amount of EMI to be paid per month is lower, it takes longer to pay off the debt; and the amount of to be paid by him would also be hefty.
Getting a loan on Home Equity:
Going for a Home Equity Loan would be considered preferable in paying off the debt loan because of the low amount of interest charged on it. It is a good option to mortgage your house or property to get a loan and pay off the debt. But, one should always be careful while doing this, because mortgaging the house could be risky; as if one is unable to pay off the loan, he could lose his house out of his hands. So, a second thought is must before you choose this option. Try it only if you think you will be able to pay the loan on time.
Line of Credit:
The Line of Credit also known as the customer’s Personal Line of Credit, is a medium of withdrawing money from the bank. This service is provided by the bank to its customers i.e. both organizations and individuals. This facility is somewhat similar to Overdraft. Being a credit worthy customer, one can avail this facility on the basis of his reputation in the bank. We see this as a good option to pay off the Consolidated Debt Loan, as the amount of interest charged on this facility is quite low.