Have borrowed funds from various sources and now are finding it difficult to keep track of all your repayments? A debt consolidation loan could provide the perfect solution. But, what is the best way to consolidate credit card debt? Can you take a business loan and use it as a debt consolidation loan? Yes, you can, if you know how to do it properly. Here we’ll see how this alternative is possible and may beneficial depending on your situation.
When should you consider a debt consolidation loan?
Many small business owners take separate loans to meet specific needs. Let’s say you have borrowed funds to buy new equipment. A few months later, you needed to raise a loan to pay for purchasing inventory for the holiday season. And then you took a third loan to launch a new marketing campaign.
In such a scenario, very soon you could find yourself in a situation where you have to make installment payments to several lenders every month. It could be hard to remember which amount is due on a particular date. Missing a payment could mean paying interest charges and other penalties.
Is there any way that you can avoid dealing with several lenders every month? A debt consolidation loan could provide the answer.
How does a business debt consolidation loan work?
A debt consolidation loan can be used to pay your credit card debt as well as the sums you have borrowed from other lenders. It involves taking a new loan and using it to repay your existing debts.
If you need an in-depth explanation of what a debt consolidation is and the steps to prepare to take one, visit this Complete Guide on Debt Consolidation Loans
You can also take a business loan (as opposed to a personal loan) and use it to pay the rest of your business loans. Why should you borrow from one financial institution offering business loans and use the funds to pay other lenders? Taking this step could provide several benefits:
What are the benefits of a business debt consolidation loan?
If you carry out your research carefully and approach the right business lender for a debt consolidation loan, you could gain many advantages:
⇨ Convenience – All your business loans would be converted into a single business loan. Now, instead of multiple repayments every month, you would need to make only one payment. This can give you more time to concentrate on your business. Additionally, the likelihood of forgetting to pay an installment would be lower.
⇨ You can reduce the amount that you have to pay every month – You could opt for a longer repayment period when you take a debt consolidation loan.
Consider a situation where your existing loans are for periods between two and four years. You could choose a debt consolidation loan with a repayment period of five years. If you do this, your monthly installment would be spread over a longer timeframe and would be significantly lower.
⇨ You can reduce your interest rate – Your debt consolidation loan could carry a lower interest rate than the rate on your existing loans. However, remember that a reduction in your interest rate may not necessarily result in a lower interest cost (or the total amount you pay in interests during the life of the loan). If the repayment period of your new debt consolidation loan is longer than your earlier loans, your total interest payments may go up.
⇨It allows you to have more cash on hand – One of the chief advantages that debt consolidation offers is that it helps your business to conserve cash. You could save hundreds of dollars every month if your new loan carries a lower rate of interest or a longer repayment period.
Now, let’s examine if debt consolidation is a good idea for every small business owner.
Is a business debt consolidation loan the right choice for you?
Many small business owners can reap tremendous benefits by taking a debt consolidation loan. But how will you know if you should opt for this type of business loan?
If you answer “yes” to one or more of these questions, it may be advisable to start looking for a debt consolidation loan.
⇨ Do you have several loans carrying a high rate of interest? Consolidating your debt may also allow you to lower your cost of borrowing.
⇨ Are there times when you miss a monthly payment because you are busy with other work? The last thing that you want is to have to pay interest for making a late payment because you forgot the date on which your installment was due. If you take a debt consolidation loan, you will have to worry about only one repayment every month.
⇨ Do you wish that the amount you pay in monthly installments to your lenders was lower? This is entirely possible if you decide to consolidate your debt. However, don’t forget that a lower monthly installment could mean paying more interest over the term of the loan.
⇨ Would you prefer to deal with one financial institution instead of multiple lenders? Convenience is one of the advantages that a debt consolidation loan offers. It’s far easier to keep track of your debt and your repayment obligations if your company has borrowed from only one lender.
If you’re convinced that you should apply for a debt consolidation loan, you should start looking for one as soon as possible. You stand a good chance of having your loan application approved if your business was established over a year ago and you have a good credit score.
But before starting the application process, take a moment to understand how this type of loan is different from refinancing.
What’s the difference between a business debt consolidation loan and refinancing?
Aren’t the two the same? After all, debt consolidation involves paying the money that you have borrowed earlier with a new loan while refinancing accomplishes a similar goal.
However, there is a distinction between the two:
Debt consolidation implies paying off several loans with a single new loan. On the other hand, when you refinance your debt, you are paying off your existing loan with a loan that carries a lower rate of interest. Consolidating your debt may not provide you with a lower rate of interest.
Choosing the right lender is vital
The success of your debt consolidation program would depend to a large extent upon the lender that you select.
At Camino Financial, every prequalified loan applicant will receive advice from one of our loan specialists. We will guide you through the borrowing process and work with you to ensure that your loan costs are minimized.
How can you find out whether you are eligible for a loan from Camino Financial? It takes only moments. Just provide some basic details about yourself and your business on this application form, and we’ll let you know immediately.
Camino Financial provides small business loans for sums up to $400,000. We’re flexible about how you use the money that we provide. Of course, you must deploy it only for your business. But it’s perfectly alright to use the loan funds to pay off your other business loans.
If your purpose is to consolidate the loans that you have taken, we can help by paying the different lenders on your behalf. Borrowers who wish to pay their credit card debt can do so with the money that we advance, as we don’t have a practice of paying credit card issuers directly. Many of our clients use our loans to pay off expensive credit card debt.
The Best Way to Consolidate Credit Card Debt: Camino Financial
A loan from Camino Financial can mean better interest rates, longer repayment terms, and transparent pricing. Here’s a quick summary of the advantages of dealing with us:
⇨ Our loan requirements are flexible – Camino Financial has fewer business loan requirements than other lenders. Consequently, the probability of your loan application getting approved is higher.
⇨ You don’t need to put up any collateral – Our motto is “No business left behind.” We believe that your inability to put up collateral shouldn’t stop you getting the money you need to grow your business.
Camino Financial’s collateral-free loans have helped to raise funds for small business owners who were turned down by other lenders.
⇨ We offer fixed monthly payments – No hidden costs, no prepayment penalties, and no unpleasant surprises! We have a transparent pricing structure, and all you have to pay is an initial origination fee and fixed monthly installments. Use our loan calculator to estimate your monthly payments.
⇨ Borrow as much as you need – The maximum loan amount on our small business loans is capped at $400,000. This is sufficient for most of our customers’ needs.
What if you need more money after your first loan from us? If you have repaid nine or more monthly installments on time, you could be eligible for a second loan for a larger amount and at a lower interest rate.
⇨ Flexible loan payback period – You can choose a repayment period that works best for you. We offer small business loans for periods ranging from 24 months to 60 months. Our microloans (maximum loan amount capped at $75,000) have a repayment period of 18 to 24 months.
We’ll ensure that you never forget about your monthly installment. Camino Financial sends out automatic SMS and email reminders to members to remind them that a payment is due.
⇨ Build your business credit – We report your ongoing payments to Experian. Every installment that you pay on time helps to boost your credit score.
Remember that there’s no hurry to consolidate all your debt into one single business loan. Do your research carefully and weigh your options. Read the fine print before you sign on the dotted line.
Taking these precautions could result in substantial savings in the long run.
You can make a beginning by applying for a business loan with Camino Financial. The process is simple and in just a few minutes you can know if you pre-qualify for one of our business loans.