What is Debt Consolidation?
Debt consolidation is an important decision for anyone looking to get control of his or her personal finances. It is easy for debt to spiral out of control, which can leave you feeling helpless in getting out of a troubling situation. Many people have found financial relief through debt consolidation because it is a set plan for tackling some of life’s most stressful issues.
You can apply for debt consolidation from a financial institution, such as Chase, to help you consolidate all of your other existing loans. Usually this comes in the form of a credit card debt consolidation, or a home mortgage debt consolidation. One of the major advantages of using this option is that you will likely be offered a much lower consolidation loan rates than what you would be able to get for a credit card. This ultimately means that you will be able to tackle your total debt obligation much faster.
Taking Advantage of Consolidation Offers
Chase offers two types of consolidation loans. The first one is for credit card loans, and the other type is for home mortgages.. Chase does not have personal loans per se. These loan consolidation packages do not have any new collateral, beside the implied collateral of the original loan, making them a great option for many consumers However, there are several conditions that need to be met as part of the process. Use a debt consolidation loan calculator to see if this will be a good idea.
The basic idea behind a debt consolidation loan is that all of your debts of a certain type are combined into one lump sum, and then paid off at a lower interest rate. It is still a loan, but it makes it easier to track and pay off your loan than it would be if you were making payments to multiple creditors.
You would need to apply for a loan consolidation package with Chase, and they have to verify the existing loans with the lending bank or credit card company. As far as the individual is concerned, the loan is moved from their current creditors to Chase. Chase then pays off your loan with the other creditors and you’re left with one Chase loan to manage instead of multiple bills from different organizations. This could be one of the best debt consolidation loan companies if you qualify.
The reason this can be done is due to the way banks operate. If a loan is not being paid, the interest payments pile up for the individual. However, internally, the loan or past due credit is decreasing in “value” for the bank. Typically, loans which have not been paid for about 18 to 24 months are sold to debt collectors at a discount.
A Part of Doing Business
For Chase, taking over a loan debt, with the express permission of the borrower is a business process which has several benefits. The primary advantage is that they can lend their money and generate a return on the interest. For another, the amount loaned, or paid for the loan, has already been verified and validated beforehand. All the paperwork will be sent to them, and, in the case of a mortgage, they do not need to inspect the property.
When it comes to credit card debt, Chase will be looking for the capacity to pay. The transfer of credit card debt from one card company or bank to another also means that the credit card holder or owner comes with the package. Once the credit card debts are paid off, the owner becomes a Chase customer. One foundation of banking is the belief that money should be loaned out in order to grow. They'll need to calculate credit card payoff to see if this makes sense. The more loans and debts that a bank holds, the better their operations will perform.
Due to these benefits, Chase and other lenders typically conduct campaigns looking for borrowers who are looking for the best way to consolidate debt. Telemarketers comb through the list of credit card holders and mortgage holders and call them to promote the debt consolidation services. These promotions are also advertised in the media, as well as in brochures at the bank branches.
The telemarketers also serve as the initial screening for the credit card or the mortgage. They have a scripted questions to see if the mortgage holder or the credit card owner is qualified for loan consolidation. Additionally, the list of contacts has also been filtered for some parameters. For credit card owners, some parameters include the remaining balance, credit limit and the payment history. For mortgage holders, some of the parameters include the value of the house, the loan value, and the type of house.
LAdvantages for the Borrower
The debt consolidation promotion is advantageous to the borrower in several ways. There are subtle differences between credit card debt and mortgages in terms of advantages for the borrower. As part of the promotion, all the credit cards are consolidated into one account. A new account will be created, and this will hold all the old credit card debts This action can wipe out credit card debt in one swoop. Furthermore, the interest for the consolidation loan is lower than the interest on credit cards, saving consumers on their monthly payments and over the longer term. Since there is now only one account, there is only one interest rate, and a single monthly charge. With a single card, the user would have an easier time paying off the credit card debts.
Mortgage owners garner almost the same benefits of a consolidation loan. It is possible to take out a second mortgage on a home, also known as a home equity loan. Each bank has its own requirements, but for the most part, the second mortgage is usually used for home improvement. The amount is usually loaned through a second bank. It is possible to consolidate this with Chase doing all the backend work.
As with most financial products, there are fees that need to be paid. Part of the fees include the closing costs. These will have to be paid before the mortgages are consolidated into one. After consolidation, the owner only needs to pay Chase instead of two banks. Most of the transactions, paperwork, and procedures will be handled by the banks, freeing the consumer’s time. There are some items which consumers must handle personally, but Chase loan officers will be able to help. The owner can negotiate for the length of the pay period, as well as the new interest rate.
One reason that debt consolidation for mortgages is popular is due to the amount of interest that they are paying. Sometimes, mortgages follow a balloon payment schedule, or an adjustable rate mortgage payment. These may have looked advantageous given the financial situation of the owner at the time the loan was made. These mortgages can be restructured during the loan consolidation. The homeowner can end up with monthly payments that are more affordable.
After the consolidation, the owner owes Chase and pays regularly according to the schedule set out in the terms of the loan. The new mortgage terms usually include lower interest rates, and a straight payment scheme. That means that the scheduled mortgage payments will be a flat rate, and must be paid every month. The mortgage will also be payable over a fixed length of time. Unless expressly allowed, the length of the mortgage payment is also fixed, either 20, 25, or 30 years. Although terms of 5, 10 and 15 are also possible depending on the mortgage balance.
How Does a Debt Consolidation from Chase Work?
If you are considering debt consolidation, it is best to apply at one of the local branches for Chase. Because Chase is one of the largest financial institutions in the country, there is likely a Chase branch location near you. The application process will be almost exactly the same for any branch that you choose. However, there will be slight differences between the way a credit card consolidation is done, as against a mortgage consolidation.
You will be evaluated for loan eligibility based mostly on your credit score. If you have a higher credit score, you will be more likely to be approved. In addition, you will be offered an interest rate that is also based on your credit score. Another consideration that will be made is your debt-to-income ratio (DTI). This means that the bank will make a calculation of your total debt obligations and your annual salary. You should be sure that all sources of your personal income, such as any annuities you may have, are calculated in this figure. Essentially, you want to be able to show the bank that you have sufficient income to be able to pay the debt obligation that you have accrued. For mortgage loan consolidations, the type of house will also be taken into consideration. Typically, single and double wide trailer houses are not eligible for debt consolidation.
Homes are usually the biggest and most important investment any family has. Depending on the nature of your consolidation loan you may lose equity that must be rebuilt. However, this is no different than the situation that exists with multiple mortgages, so it is not a major concern for most home owners.
Banks will also evaluate your credit score. Checking a credit score can cause it to drop slightly, so be wary if you are planning on taking on any additional loans or applying for new credit. The better your credit score, the better the rates you’ll be offered on your home consolidation loan and other financial products. Read more about how to get a debt consolidation loan with poor credit.
Credit card consolidation also results in an initial hit on the individual’s credit rating. However, it’s important to keep in mind that while the inquiry may cause your score to fall a few points, lowering the amount of revolving credit used will create a huge jump in your score. Moreover, if you pay your consolidation loan bills on time, then your credit score will climb to reflect that you are a responsible borrower. You may also want to consider Lendingtree debt consolidation as another option.
How Will You Know What You Qualify For?
When you submit your loan application to a Chase branch, it will be assigned to a Chase representative for review. If the assigned representative has any questions about the information that you submitted with your application, he or she will contact you directly. You can also ask any questions that you may have by contacting that representative directly. Consumers will find that their credit card balance has been reduced to zero, as all of the money they owe has been transferred to the consolidation loan account. For mortgage loan consolidation, there would be documents still to be signed before these are finalized by Chase. In both cases, a lot of the actual leg work is done by Chase as part of the service.
Loan applications typically do not take much time at all to process. You can expect a decision in as little as a few days. For credit card debt, the quicker you are able to pay off your debt, the sooner you will be able to qualify to borrow money at a lower interest rate to take care of the last portion of your debt. For mortgage payments, you need to understand whether the consolidated mortgage payment period can be shortened by paying more money upfront. This may not be allowed in some instances.
Financial firms do transactions with each other every day. Although the main selling point for debt consolidation loans is a lower interest rate, there are other advantages for the borrower. The convenience of having only one creditor bank is immeasurable. It also helps give the borrower some peace of mind that they can repay the resulting consolidated loan amount.
Some people might be intimidated by taking out such a large loan. Others might be intimidated or ashamed of the size of the debt they’ve accumulated. However, when everything is considered, the advantages outweigh the negatives. A consolidation loan gives consumers a better chance of paying off the credit card balance or their mortgage, and lets them save money while doing it. If you're a veteran then look into va military debt consolidation loan offers.
Financial Advisor, MoneyBeagle
Dan is one of the top financial experts when it comes to debt consolidation. With more than 20 years of experience helping people tackle debt, he has a unique insight when it comes to solving debt-related problems.
Dan got his start when he went to work for a bank after getting his Business Degree. He worked his way up and became a loan officer. This position gave him unique insights into the ways that financial products work and how people can utilize different financial products to improve their lives. He’s seen hundreds of success stories and just as many failures – so he knows what steps are most likely to help his readers.
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