How to Calculate Debt Consolidation Payments

01:30 AM March 08, 2019

Going into debt doesn’t need to be the end of the world. There are steps you can take in order to pay down your debts effectively and efficiently. Implementing debt consolidation payments can help you become debt free in no time. Debt consolidation payments allow you to take any high interest rates you may have attached to your remaining credit cards and combine them into one low interest sum. Utilizing helpful tools such as a debt consolidation calculator can help determine the best course of action for eliminating your debt.

There are four ways to place all of your existing debt into one payment. Utilizing an online debt consolidation calculator will help determine which is the best loan option to implement.

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Opening a 0% interest line of credit

  • This allows you to transfer all debts into one card that offers 0% interest as long as you pay the balance in full during the allotted promotional period. This type of consolidation requires you to have a good to excellent credit standing. It usually has a balance transfer fee attached to it, and any interest obtained will typically be shown after twelve to eighteen months. A debt consolidation calculator can help you determine your monthly payments.

Fixed-rate debt consolidation loan

  • You can take out a loan that enables you to pay off the debt that you’ve acquired, whether that is credit card debt, student loans, or another form of debt. You then pay off the loan amount through loan installment payments over an agreed period of time. Lower interest rates are given to those who hold a higher credit score. Placing your current financial information into a debt consolidation calculator can help put you on the right track.

Home equity loan

  • Determining the equity of your home can help you pay off any existing debts or make major purchases. Home equity loans allow you to obtain a loan interest that is tax deductible; you are not required to have excellent or even a good credit standing, and this offers a lower interest rate than other unsecured loans. If you are unable to complete the payments on time, however, it can result in the foreclosure of your home. Some factors to consider before acquiring a home equity loan are your current debt-to-income ratio, as well as understanding that these types of loans are typically payed off over the course of ten years or more. Taking advantage of a debt consolidation calculator can help you determine if a home equity loan is the ideal option.

401(k) Loan

  •  If you’ve had to rule out other options in order to pay off your debt, you can use the money you have in your existing 401(k) plan under your current employer. Keep in mind that this will influence your retirement fund, but this can be a viable option. This loan is set to be paid within a five-year time frame. If you are fired or laid off, however, the loan payments typically need to be paid within a sixty-day period. This loan isn’t considered on your credit report, and it offers lower interest rates than other personal loans. A debt consolidation calculator can be used in order to determine if a 401(k) loan is the best option for you.

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Qualifying for Debt Consolidation

Before issuing any type of debt consolidation loan, lenders will look at several variables. The first one being your current credit standing. Lenders will run a credit report that will depict your payment history, including how many credit lines you have open. Another factor they will look at is proof of income. Lenders need to know that you have the means to pay off the loan. They will look at your financial stability as well, reviewing details such as how many late payments, card cancellations, and open lines you have initiated. These are used to determine the level of risk in your portfolio. Lastly, they will look at equity. Any collateral that you have in items such as a home equity can help you qualify for larger loans. Online tools such as a debt consolidation calculator can give you insights into the best debt consolidation option for your current financial situation.

Debt Consolidation Calculator

Debt consolidation calculations can be completed on most lender sites such as Bankrate.com. Here, you can place the amount of debt you have and the annual percentage rate attached to the particular loan. The debt consolidation calculator will tell you the payment details when you consolidate all of your debts into a single fixed rate loan. Having several credit card payments can lead to payments slipping through the cracks; it is hard to organize your debts when they are scattered through different creditors. Placing all of your credit card debt onto one card will allow you to submit a single monthly payment. This can help to alleviate any late fees or payment cancellations damaging your credit standing.

Before paying off your debt, it is important to research the options that are available to you. Considering important factors such as credit score, current income, or any job or financial changes in the future will help you find the best debt consolidation plan for you. The more efficient you can be in paying off the debt, the better chance you will have to keep interest rates low and penalties diminished. A debt consolidation calculator will give you an accurate depiction of what your payments will look like under different consolidation agreements. Lenders will help you work with any issues that may be getting in the way of this refinance. For example, if your credit is too low, lenders can go through your report line by line to determine what things are negatively effecting your credit.

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