There are a few ways to get a loan to pay off bills without putting anything up as security. But let's talk about one of the most common types of loans used to pay off bills.
Credit card debt consolidation loans are the most common type of no-collateral loan. Most of the time, people put as many debts as they can on one credit card. It is much easier to keep track of one company and one payment than it is to keep track of several companies and payments.
This choice is used for a few different reasons. First, there isn't a long approval process or a lot of paperwork to fill out. For this kind of loan, you don't have to put anything up as security.
Also, many of the biggest credit card companies offer very good deals if you put all of your bills on their credit card. They give two very good reasons:
- At the end of the 12-month grace period, they usually offer you a much lower interest rate. This is usually a lot lower than the interest rate you have now.
- They will let you pay them over a few months with no interest. You should be able to get a 12-month option with no interest.
Many people who need a loan but have nothing to put up as collateral will find this very appealing. But there are some major problems with it. Make sure to read the agreement carefully. Most of the time, there are three possible problems:
- Your payment will be late if the credit card payment doesn't go through correctly. The penalties are the same as those listed above.
- If you don't pay on time, the grace period could end right away. But that's not everything. You will probably get a higher interest rate than what you would get at the end of the year. So, you could end up in a worse situation than before you got the consolidation loan.
Note: It's very important to write down and keep track of all the payments you make. Write down the date, the amount, and the number of the check you used. If there are any problems, you can use the facts and numbers to fight the late payment.
As a side note, you might want to think about paying online. You can set up your online payment to pay your bill on a certain date. They also keep track of when and what was paid.
- Things will go wrong if you go over your credit card limit. They include things like fines, late fees, and the end of your grace period.
If you decide to use a loan with no collateral to pay off your credit card debt, make sure you pay on time. You should try to pay as much as possible each month. This can help you pay off a lot more of your debt in a year because all of the money you pay goes toward your debt and not interest. Don't put any extra charges on your credit card either. You want to get out of debt, not get deeper into it.
Do your research now that you know some of the pros and cons of getting a bill consolidation loan without collateral. It might be a good idea to talk to a debt counsellor to get an outside, unbiased opinion.
