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If you owe a number of different creditors and/or have outstanding loans with high-interest rates, a debt consolidation loan allows you to pay off all of what you owe to your current lenders. Then, you’re only obligated to pay back one creditor, which is the bank or institution that provided your consolidation loan.
This allows you to only worry about one monthly payment instead of several, which can help you avoid late fees if you occasionally forget to pay one of your creditors. Additionally, debt consolidation loans may allow you to take advantage of a lower interest rate. Over time, interest on debts owed can add hundreds or thousands of dollars to what you have to pay, so a loan with a low-interest rate can help you reduce the time and money it takes to eliminate your debt. How Do Military Debt Consolidation Loans Work? VA Home Loans are backed by the government, but they are not provided by the Veterans Administration. The VA puts limits on lenders, such as caps on closing costs, interest rates, and fees.
Along with the fact that loans are only backed by the government, so they have secured loans. Unsecured loans do not require that you put down collateral, and credit cards are an example of unsecured loans. The downside of a secured loan is that if you’re not able to pay it back, whatever you’ve put down as collateral may be taken by the bank. In this case, it would be your home.
You are borrowing against the value you have built up in your home. If you do not have a lot of equity in it, this type of loan is probably not going to be available to you.
Members of the military are just like everybody else, they encounter financial difficulties too. Financial emergencies can be difficult to overcome without assistance, especially if there’s already a Veterans Affairs loan that you’re already paying for.
Having a VA loan means you can do a VA consolidation loan. It is a debt consolidation loan. Credit card bills, payday loans, and other forms of unsecured debt are all paid off in a single payment. This makes it easier and more practical – you pay only one creditor and only bear one interest for the amount you are paying.
The Veterans Affairs serves as the guarantor for the refinanced loan. However, take note that the amount borrowed cannot exceed how much your home is valued. What makes a VA Loan better than a typical debt consolidation loan is that there are lower interest rates and closing costs. It would cost you more if you were a civilian trying to pay the bill using your credit card. The beauty of refinancing loans like this is that the loan can be extended over 10, 15, or even 30 years. This offers the borrower a wide array of repayment choices.