As the name implies, this is a loan obtained to consolidate all the other debts of a consumer. As consumers we obtain several loans for several purposes, may be a loan to purchase properties, get an overdraft facility or get a credit card debt. Copy the link given below and paste it in new browser window to get more information on Debt Consolidation Loan:- http://www.transtutors.com/homework-help/finance/debt-consolidation-loan.aspx

1. Debt Consolidation
Loan

2. What is Debt Consolidation Loan?
A Loan taken to Consolidate all Other
Existing Debts of a borrower
Problems with Multiple debts –
 Different credit terms
 Different repayment/ installment
payment periods
 Higher interest rates
 Difficulty in managing number of loans

3. Ways of Consolidating Debts
Getting a loan approved
and settling all other dues
using the amount
obtained
Getting the assistance of a Debt
Management Agency where
one monthly payment is done
to the agency and they manage
the individual creditors

4. Benefits of a Debt Consolidation Loan
 Debt management process is made less complex
 Savings in Interest costs
 Longer repayment period
 Lower monthly installment amount

5. Types of Debt Consolidation Loans
Secured Loans:
 Given on a Collateral
 Lower Default risk for the lender
 Higher Loan amount
 Lower Interest rates
 Longer Repayment period
 Interest cost may be tax-
deductible
Unsecured Loans:
 No requirement for a collateral
 Higher Default risk for the lender
 Lower Loan amount
 Higher Interest rates
 Shorter Repayment period
 Interest cost may not be tax-
deductible

6. Obtaining a Debt Consolidation Loan
A Debt Consolidation Loan could
be obtained through;
 Banks
 Finance companies
 Debt Relief companies
 Credit Unions
 Online lenders
Important considerations when obtaining a debt
consolidation loan:
 Amount
 Repayment period
 Interest rate
 Other fees and charges involved
 Availability of all relevant information
 Regulation on the lender
 Customer reviews

7. Determinants of Debt Consolidation Loan
Rates
 Credit Score:
Credit worthy debtors get favorable credit terms
 Collateral:
Debtors prepared to provide a collateral get favorable credit terms

8. Debt Consolidation Loan for Bad Credit
Effects of Bad Credit
 Low credit score
 Less accessibility to further borrowings
 Higher interest rates
 Unfavorable credit terms
Strategies to obtain favorable terms in
Debt Consolidation Loans
 Giving a collateral
 Getting assistance of co-signers
 Seeking help of specialized lenders for bad credit
 Finding a credit counselor

9. Deciding to Obtain a Debt Consolidation Loan
 Remember! There are alternatives to obtaining a Debt Consolidation Loan.
Choose what is right for you!
 Do not fall into another debt in the process of attempting to get out of
existing debt burden!
 Be cautious about scammers!

10. Disadvantages of Obtaining
a Debt Consolidation Loan
 Another debt becomes the solution for the previous debts.
 Due to longer repayment periods of the loan, debtors might end up
paying higher interest in the whole process.
 In a collateralized loan, debtor bears the risk of losing his asset in case
of delays or non-payment of installments.

11. Debt Consolidation Loan Calculator
Helps to calculate:
 new installment amount from the new
loan after consolidating debts and
 savings in the process
Calculations can be done by:
 The customer representative of the
lending institute.
 By our own using online calculators
taken from lender websites

12. Credit Card Consolidation
What is it?
Combining outstanding amounts of
multiple credit cards together.
How does it work?
 Obtain a Balance Transfer Credit Card
with 0% or lower interest rate
 Pay off outstanding dues of existing
cards using the new card
Pitfalls:
 Unless spending pattern is changed, this
would become another debt
 Interest benefit could be only for a
limited period
 Hidden/ Additional charges
 Authenticity of the issuer
Benefits:
 Can avoid bad credit image
 Cost savings from debt
settlements during initial months
 Need to manage only one
credit card

13. Hey Friends,
This was just a summary on Debt Consolidation Loan.
For more detailed information on this topic, please type the
link given below or copy it from the description of this PPT
and open it in a new browser window.
http://www.transtutors.com/homework-help/finance/debt-
consolidation-loan.aspx