Debt consolidation is just the merging of all debts. Debt consolidation can be done through various methods; by taking out debt consolidation loans, debt consolidation mortgage, debt consolidation remortgage, or even through debt counseling. Debt consolidation loans offer an opportunity to consolidate all your loans in one manageable loan. Debt consolidation programs offer an opportunity to pay off all the bills and multiple loans in one easy installment. It also offers cheaper debt resolution options to the borrower.
Some people think that debt consolidation reduces the amount of the whole debt. But that is not true. The amount of debt never reduces overnight. Only the interest rates are reduced. Debt consolidation loan is provided by various banks and credit unions. Debt consolidation loans are used for variety of purposes. While availing debt consolidation loan, you don’t have to specify the purpose of it.
Debt consolidation loan comes in two forms: unsecured and secured debt consolidation loan. Secured debt consolidation loan can be obtained by offering collateral. Amount approved will depend on the equity value of the collateral only. There is no need of offering any collateral in order to get unsecured debt consolidation loan. The rate of interest depends on borrower’s credit score and financial position.
Debt consolidation loans can be availed even if you have bad credit history. In fact, it provides an opportunity to mend the credit status of a borrower. If you follow any debt consolidation program, eventually you will get rid of getting calls from many creditors. Debt consolidation will allow you to deal with a single creditor.
Benefits of Debt Consolidation Loans:
1) You save money on interest rate
2) You make one repayment in stead of several
3) You make smaller monthly payment
4) You avoid confusion
A good loan consolidation center will advise you on the best route to take to consolidate all your debt. If you have bad credit, they can also assist you in repairing this.
Debt consolidation loans should only be considered when your situation is dire. Because they can extend your payments to as much as 30 years, it’s important that you understand that they are a long term commitment.
Debt Consolidation loans usually require you to offer your house as collateral. If you don’t own a house then you may need someone to go guarantor for the loan. It is a good choice to get a consolidation loan when you have a large amount of credit card debt due to the high interest rates of credit cards.
Debt consolidation enables one to solve the fundamental problems of high debt without having to take drastic steps like declaring bankruptcy. A debtor should first make sure that the terms of the debt consolidation loan are understood. If there are any questions or doubts, they should be discussed with the debt consolidation loan counselor.