Unsecured Debt Consolidation Loans and Understanding Amortization
When you research for unsecured debt consolidation loans, are you aware of what you are researching for? Unsecured debt is a debt that does not have any collateral. Usually, when you apply for this type of loan, the loan company will ask you if you have any collateral you would like to use in case the loan does not get paid.
Sometimes but not always, the consolidated loan company will lower the interest rate because you decided to use some of your collateral. The collateral you can use can be from your paid off cars, stocks, cash, or bonds. These types of collateral help the loan company to make a decision to give you the loans or not. Thos also gives them some security that you will pay the loan back because you don’t want to lose your collateral if the loan is not paid.
The best consolidation loans to look for are the ones that have your best interest in mind. When you decide which debts you are going to consolidate, you will want to look for unsecured debt consolidation loans that have the following information.
Information Tip 1 - Lower annual percentage rate (APR) then your current loans.
Information Tip 2 - Lower payments than your current loans one they are consolidated.
Information Tip 3 - Preferably less time to pay off the loan then your current loans.
Information Tip 4 - Friendly customer services that are easy to do business with.
When you have these fours tips aligned and you are satisfied, ask yourself why you want to get his loan and what goals are you going to set to stay out of debt. Without the use of setting goals, you could go down the path of getting in more debt at a later time in your life. Then, you might have look for more consolidation loans all over again.
That is why it is always wise to give more than the minimum payment. Therefore, you will get out of the debt faster and maintain better credit as well. In order to do this, you must understand what the amortization schedule looks like. This is to determine how much more money you can pay that is above and beyond the minimum payment.
Amortization occurs when financial loan payments are made until the loan is finished. For example, a car payment, in most cases a fixed payment per month, for X amount of years. The amortization part of a car loan will usually include a principal and interest payment rolled into one payment. The principal part of the payment starts off small but over time becomes larger as the loan is paid back. The interest part of the payment starts off large and ends up becoming smaller as the loan is paid back.
This process can take years and sometimes months for the loan to be repaid, depending on how fast the person is able to pay back the loan. This is why it is important to understand what amortization is.
Here is a quick example of a loan amortized.
This loan example is for a car and has 48 months of payments
(4 years) at $400 a month.
Payment 1 - $400 payment = $15 principal and $385 interest
Payment 2 - $400 payment = $17 principal and $383 interest
Payment 3 - $400 payment = $19.50 principal and $380.50 interest
Payment 4 - $400 payment = $22.20 principal and $377.80 interest
You can usually obtain the amortization information from asking the loan representative for it or going on-line and searching for the words amortization schedule.
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