debt consolidation loans texas

debt consolidation loans texas

Texas Debt Consolidation as an Alternative to Bankruptcy

Before considering bankruptcy there are several options you might want to pursue. The availability and usefulness of these options will depend on your employment (or income) situation and the type of assets you have. These other options involve consolidating your payments through a credit counseling service or consolidating all your debt through a debt consolidation loan.

There really are two types of debt consolidation loans, one that is secured by equity in your home and one that is not. (see Texas Exemptions) With a debt consolidation loan that is not secured by your home a company simply loans you money to pay off your debt. You make one monthly payment to the consolidation company and they take care of the debt with your creditors.

You may also be able to lower your cost of credit and improve your financial circumstances by consolidating your debt through a second mortgage or a home equity line of credit. Think carefully before taking this on. These loans require your home as collateral. If you can’t make the payments-or if the payments are late-you could lose your home.

This option is especially important to consider if you have more equity in your home than you are allowed to protect with your Texas home exemption. If you have more equity in your home than can be protected with your Texas home exemption you will either have to surrender you home under a Chapter 7 bankruptcy or, if you want to keep your home, create a payment plan under a Chapter 13 bankruptcy. If you are considering a Chapter 13 bankruptcy to keep your home you might want to first pursue the debt consolidation option.

Consolidate debt into a home loan

Mr Simpson was asking about consolidating all his debt into his property to take advantage of the lower interest rate of his home loan.

He has a house worth R1 200 000 on which he owes R400 000. He had taken the home loan many years ago when he paid around R 600 000 for the property and at the time he qualified for a good interest rate at prime less one percent. Since then he has had a number of other expenses, some unforeseen and others just too large to deal with on his month to month salary, and therefore he has had to take a number of loans to cover these. He has store cards of around R20 000, a few credit cards totalling around R50 000 and a personal loan of R90 000 he is paying over three years which was meant to cover his daughter’s study fees.

He is paying around R5700 per month to his house and about R9500 per month to all his other debt. There are two ways to give him more money to live on. The first is by applying for a larger home loan and settling all the other debt. It would lower his monthly payment considerably, but there are a number of things he would have to keep in mind. Firstly, he would essentially be paying that unsecured debt over a very long period, and even though the interest is reduced dramatically, it would still have a negative impact on his estate. As an example, if Mr Simpson was married, and something had to happen to him during the period he was paying the debt, it would severely affect the inheritance he would leave behind considering that the property would now be surety for the debt. Unsecured debt should ideally be kept unsecured so as not to affect one’s nett worth or estate at any point.

The second solution might be through a debt counselling process. Debt counselling is designed to get rid of the unsecured debt leaving Mr Simpson with only his home loan to pay. Credit providers often agree to interest rates similar to secured debt when they see that a consumer is facing financial hardship, and by keeping this debt separate to the home loan, Mr Simpson could be rid of his nsecured debt in under five years. If he is left just with the original home loan to pay, he should be able to manage perfectly well, and can then go off debt review. This solution also retains the credit life insurance on his unsecured debt, so should anything happen to him during the period, his estate would not suffer.

Consolidate debt into one payment

Although many people turn to debt consolidation as a means to reduce what they are paying, consumers should be aware what they are signing up for. People often attempt to roll shorter term debt like credit cards and store cards into a longer term loan in order to reduce the monthly payment. What they are in fact doing often carries a double penalty. Firstly, a typical 5 year consolidation loan would result in consumers paying far more than double the original loan amount when adding the fees and interest. Often one can see that after credit life insurances and monthly fees are added, one could typically pay back R260 000 on a R100 000 loan. Taking that same example of the R100 000 loan, with a monthly instalment of around R4300, only R680 would come off the capital sum. The rest would all go to interest and fees in month one.

The reason for this leads me to the second penalty consumers face with consolidation loans. Credit cards, overdrafts and store cards are called Credit Facilities in the act. It really means that one can pay back and use the funds as one sees fit and can keep the facility open. This is in contrast with a Credit Agreement like a fixed term loan. In terms of regulations, Credit Providers can charge ten percent more in interest for Credit Agreements that Credit Transactions. Consumers are therefore often exchanging cheaper credit facilities for more expensive agreements only because the monthly instalment is less. One could use the analogy and say “would you still borrow from Peter to pay Paul if Peter was charging you more in interest?”

Debt Counselling or Debt Review can also consolidate your debt into one payment but it will reduce the interest. It is always advisable to look carefully at all the options before committing to such big decisions.

Debt Consolidation Loans up to $100,000

Debt Consolidation Loans up to $100,000

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Options for Debt Consolidation

You have several options when it comes Debt Consolidation. Make sure you know which one is perfect for you.

Knowing the right things to consider when finding the right Debt Consolidation Lender is important.

We have some helpful reminders for those who are considering debt consolidation.

We’re providing you with the steps you need to take in order to start the Debt Consolidation process.

Choosing the Best Debt Consolidation Loans

To create the best list of Debt Consolidation partners for you, we’ve taken the following factors into account:

Before anything else, you first need to need to know if you qualify for the loan. Most lenders have a minimum FICO score – this represents their risk appetite. Even if you find what you believe to be the best company to get a debt consolidation loan from, you will have to look for other options if you do not meet their requirements. Therefore, if you have a relatively low FICO score, be realistic and expect higher APRs. On the other end, if you have an excellent FICO score, your options will be a lot broader.

Annual percentage rates (APR) and monthly payments

If you are looking at estimated APR and monthly payments, you should already have narrowed down the list of potential lenders on where you qualify. Of course, you want to get the best deal out there. However, understand that this is limited by certain factors, largely by your FICO score. What you will have now is a range of your potential interest rates you can accrue based on the information you gathered. Assuming you have the same loan term, the higher the interest rate is, the higher your monthly payments will be.

Aside from interest, lending institutions earn money through various fees. There are different types of fees that a lender can impose on clients, but the most common one is a prepayment fee. Your best debt consolidation loans will not come with fees unless they are very minimal. Know the fees associated with your loan. Otherwise you might be surprised when your bill comes.

If your credit rating is impeccable and you have found the perfect debt consolidation loan, you may find their payment process is indirect and very democratic. Is this still a viable option? You should always consider the accessibility and convenience of your lender. There are other concerns in your life besides settling your debt. If your chosen debt consolidation loan becomes a burden instead of making your life easier, you are better off with another creditor.

Lastly, assuming that you are no expert when it comes to how these things are handled, there must be qualified and competent customer representatives to bridge the knowledge gap for you. Even if you feel you are comfortable with a lender, you still must be certain that your concerns are addressed accurately in a timely manner. Especially when it comes to fees, there must be clear communication between the two parties. Without that, you might unknowingly hold wrong expectations and get very frustrated later on.

The decision must not be on your financial concerns alone. In the end, the loan is just as good as where you source it. Your choice must be a balance of all these factors, with some factors weighing more heavily than the others depending on your priorities.

Debt Consolidation with Personal Loans

Many individuals accumulate debt with various organizations. This can include things like student loans, credit cards, business loans, mortgages, and many other lending products.

One of the best ways to simplify this complex web of bills is with a debt consolidation loan. A debt consolidation loan is when you are given a loan to pay off other debts. The result is that your bills are consolidated into one place so you don’t have to worry about tracking multiple different payments.

You pay a fixed payment to your lender for a period of two to five years on average. Most consolidation loans are offered at a fixed interest rate, which gives borrowers the stability and predictability they might lack in their current financial arrangements.

Are you a good candidate for Debt Consolidation?

You might be a good candidate for a debt consolidation loan if:

  • You can repay your consolidation loan without accruing additional debt.
  • You have the right credit to obtain a loan at a better interest rate than your current debt.
  • You are having a hard time keeping up with multiple different payment schedules.

However, as with all financial products, there are a few things you should pay attention to:

  • Make sure you are aware of the fee the consolidation lender will charge
  • Understand what support you have access to, for example: will the lender pay your creditors directly?
  • Check if there is an advantage to having a co-signer on your loan.

Consolidation Options: Loans vs. Credit Cards

With the right credit, you can get a card that has an introductory 0% interest period. Transferring your current balances to this new card can save you money.

Something to consider, though, is that the introductory rate will eventually expire. If you haven’t paid off the balance by that point you could be in for a surprise when the bill comes due. The interest rate on credit cards is almost always higher than the interest rate on a personal loan, so if something comes up and you can’t pay off the balance on time you’ll face a large expense.

There are some distinct advantages to personal loans when compared to credit cards for debt consolidation.

The first advantages have to do with the structure of a personal loan. The fixed payments provide predictability on when you will be done paying your loan, and the interest rates are usually much lower for personal debt consolidation loans than they are for credit cards. In fact, because loans are issued through the banks, there are limits on how high of an interest rate they can have. For example, federal credit unions are typically limited to 18% per annum.

Another advantage is the way that the debt is treated on your credit report. Credit cards appear as something called revolving debt, which has a greater impact on your score than installment debt, which is how a loan is categorized. This has to do with the fact that credit cards have a credit limit, and using too much of your credit limit can negatively impact your score. These factors don’t apply to installment credit.

There are a number of ways that you can get personal debt consolidation loan, but one of the most common is to use online services to compare different lenders. Each lender has different policies and procedures, so it is important to understand how to compare different personal debt consolidation loan lenders.

Debt Consolidation in Texas (TX)

Isn’t it time to get out of debt? At Texas Debt Consolidation, we can help. It may be possible to repay your debt faster than expected. Some programs involve debt consolidation loans, some do not. Either way, you should pay off 100% of your debt, but you will profit from a simplified payment scheme, as well as less harassment from your creditors. Please don’t hesitate. Learn how much debt consolidation in Texas can save you.

Consolidating Debt Through a Texas DMP

Would you like to get out of debt in less time, with less interest and penalty charges? Then you may want to enroll in in a Texas debt management plan. These programs allow you to repay your debts entirely through a single monthly payment. The benefits are huge: decreased interest rates, payments, and fees. Typically your creditor begins giving you these incentives after three months of timely payments.

Additionally, these plans are typically pretty affordable:

Debt Consolidation Loans in TX

You will find two major types of debt consolidation loans: unsecured bank loans and loans collateralized by your home, of which the second option is most typical. As opposed to posting checks to a multitude of credit card companies each month, you’ll simply be responsible for your monthly debt consolidation loan payment.

Remember that you won’t have a consultant steering through each step as you would have during a debt management plan, nor will your credit card debt be reduced as it would be during a Texas debt settlement.

  • Income Annually: $44,695
  • Income Per month: $3,725
  • Debt Per Person: $1,568
  • National Debt Rank: 29
  • Bankruptcy Rate: 0.21%
  • Annual Bankruptcies: 51,800

Debt consolidation services in TX will want to know how much debt you owe that’s non-secured. That means it is not guaranteed by any equity. The most common causes of credit card debt are credit cards, rent, medical expenses, and store cards.

In a perfect world, the amount of debt you owe each and every month will take up about 1/3 of your wages. These debts include credit card bills, loans, and rent or home loan repayments. Let’s suppose you make $3,725 each month, which is about average average in TX, then, if possible, you would spend around $1,341 monthly. Of course, countless Texas residents are carrying severe debt, indicated by a debt to income ratio of 50% or higher. That means they are having to spend more than $1,900 per month!

Just how many people need to get out of debt in TX? We have been able to conclude that 2,107,701 of Texas’s 25,145,561 residents need help with debt.

As per FTC guidelines, your Texas debt consolidation organization must fully describe:

  • Cost structure.
  • How long before they contact each creditor.
  • How much must be saved before they will reach out to each creditor.
  • How your credit score will be impacted.

Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable pay-off terms: a lower interest rate, lower monthly payment or both. Consumers can use debt consolidation as a tool to deal with student loan debt, credit card debt and other types of debt.

There are several ways consumers can lump debts into a single payment. One is to consolidate all their credit card payments onto one new credit card – which can be a good idea if the card charges little or no interest for a period of time – or utilize an existing credit card's balance transfer feature (especially if it's offering a special promotion on the transaction). Home equity loans or home equity lines of credit are another form of consolidation sought by some people, as the interest on this type of loan is deductible for borrowers taxpayers who itemize their deductions. There are also several consolidation options available from the federal government for those with student loans.

BREAKING DOWN 'Debt Consolidation'

Theoretically, debt consolidation is any use of one form of financing to pay off other debts. However, there are specific instruments called debt consolidation loans, offered by creditors as part of a plan to borrowers who have difficulty managing the number or size of their outstanding debts. Creditors are willing to do this for several reasons – one of them being that it maximizes the likelihood of collecting from a debtor. These loans are usually offered by financial institutions, such as banks and credit unions; there are also specialized debt-consolidation service companies.

There are two broad types of debt consolidation loans: secured and unsecured. Secured loans are backed by an asset of the borrower’s, such as a house or a car, that works as collateral for the loan. More traditional, unsecured debt consolidation loans, which are not backed by assets, can be more difficult to obtain. They also tend to have higher interest rates and lower qualifying amounts. Even so, the interest rates are still typically less than the rates on credit cards. Also, the interest rate is fixed.

“Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H.E. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Md., and author of “How to Get Out of Debt.”

These types of loans don’t erase the debt; they simply transfer all your debts to a different lender or type of loan. (In circumstances where you need actual debt relief or don't qualify for loans, it may be best to look into a debt settlement rather than, or in conjunction with, a debt consolidation. Debt settlement aims to reduce your obligations rather than just reducing the number of creditors. Individuals usually work with a debt-relief organization or credit-counseling service. These organizations do not make actual loans; instead, they try to renegotiate the borrower’s current debts with creditors.)

Advantages of Debt Consolidation Loans

Freeman says that debt consolidation loans are most helpful for those who have multiple debts, owe $10,000 or more, are receiving frequent calls or letters from collection agencies, have accounts with high interest rates or monthly payments, are having difficulty making payments or are unable to negotiate lower interest rates on loans. Once in place, a debt consolidation plan will stop the collection agencies from calling (assuming the loans they're calling about have been paid off).

There may be a tax break, too. The Internal Revenue Service (IRS) does not allow you to deduct interest on any unsecured debt consolidation loans. If your consolidation loan is secured with an asset, however, you may qualify for a tax deduction. Debt consolidation loan interest payments are most often tax deductible when home equity is involved.

A consolidation loan may also be kind to your credit score down the road. “If the principal is paid down faster [than it would have been without the loan], the balance is paid off sooner, which helps to boost your credit score,” says Freeman.

For example, say an individual with three credit cards and a total of $20,000 owing at a 22.99% annual rate compounded monthly needs to pay $1047.37 a month for 24 months to bring the balances to zero. This works out to $5136.88 being paid in interest alone. If the same individual were to consolidate those credit cards into a lower-interest loan at an 11% annual rate compounded monthly, he or she would need to pay $932.16 a month for 24 months to bring the balance to zero. This works out to $2,371.84 being paid in interest. The monthly savings is $115.21, and over the life of the loan the amount of savings is $2,765.04.

Even if the monthly payment stays the same, you can still come out ahead by streamlining your loans. Say that you currently have three credit cards that charge a 28% APR; they are maxed out at $5,000 each and you're spending $250 a month on each card's minimum payment. If you were to pay off each credit card separately, you would be spending $750 per month for 28 months and you would end up paying a total of around $5,441.73 in interest. However, if you transfer the balances of those three cards into one consolidated loan at a more reasonable 12% interest rate and you continue to repay the loan with the same $750 a month, you'll pay roughly one-third of the interest ($1,820.22), and you will be able to retire your loan five months earlier. This amounts to a total savings of $7,371.52 ($3,750 for payments and $3,621.52 in interest).

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