If your debts are beginning to overwhelm you, there are solutions and one of those solutions is debt consolidation. Although getting a loan so that you can consolidate your debt isn’t easy, there are ways you can get a loan, even if you have a bad credit history.
The debt consolidation loan is often one of the best solutions to get out of debt and to help you avoid bankruptcy or other serious financial problems. With debt consolidation you will exchange several payments for one payment. The loan you get will go toward paying all of your debt, you will then be left with your loan to pay and that is all, aside from your monthly living expenses. This is one of the best ways available to pay off outstanding debt, such as other personal loans or credit cards.
The Two Types of Debt Consolidation Loans
There are basically two types of debt consolidation loans, the secured loan and the unsecured loan.
Secured Debt Consolidation
With the secured debt consolidation loan you can usually get enough money to consolidate all of your personal debts, such as loans, credit cards, store credit cards, etc. The loan will be secured with an asset, usually a home that you own. Although you can often get larger loans if you have a house to use as collateral, if you are not able to make your loan payments you will run the risk of having your house repossessed. Due to the fact that this type of debt consolidation loan is secured with a home, this option is not open for tenants.
With a secured loan you can frequently get a lower interest rate than what you are already paying for you’re unsecured debt that you want to consolidate; this means that you will actually be saving money and possibly paying less each month than what you are now. The only real problem with using a secured loan for debt consolidation is that it is risky if you are not absolutely sure you will be able to make your loan payments on time each month.
Unsecured Debt Consolidation
You also have the option of getting an unsecured loan for debt consolidation; this type of loan may provide you with enough money to consolidate all of your debt into one payment. The advantage to the unsecured loan is that you will not be risking your assets; the disadvantage is that the interest rate will be higher than if the loan was secured. Even though the unsecured debt consolidation loan will come at a higher interest rate, it may still be lower than what you are paying now.
The best time to think of debt consolidation is before you find yourself in financial peril. Consolidating all of your debt into a monthly payment that is more manageable is a better choice than being forced into an IVA or bankruptcy.