Debt consolidation is the process of taking a single loan to payoff all your existing loans thereby helping you with just one monthly payment rather than many. The best thing about this is just one payment every month would be easier to manage. The idea is to lower the interest rates and the monthly payment while paying up your debts much more quickly. Debt consolidation is usually obtained by people who are repaying several debts to several banks such as a student loan, personal loan, credit card loan, etc. that is something which is not included in the asset.
Types of Debt Consolidations:
- Through Secured Loans: One of the options is to consolidate all your unsecured debts to one secured debt by taking a loan against property, loan against cars, equity, gold, etc. The main advantage of this loanis the interest is much less as the loan is secured.
- Through Unsecured Loans: This is great if you do not have or do not wish to pledge your collateral. Many banks offer unsecured consolidation with a much lesser rate of interest than usual but higher than secured loans.
If you wish to consider debt consolidation, begin the process with debt counseling and there are many agencies and companies, like Debt Consolidation Express that will help you out.
Should You Consolidate Your Debt?
If you are tired of seeing credit card balance rising up every month and the balance has reached levels that have started to overwhelm you,then you just need to have a plan which you can easily follow.In this situation, debt consolidation is something that you should consider. In simple words, if you are ready and willing to turn your financial life around, thenit will help you do it. When you would want to be responsible with your money and stay away from credit card dependence, then you will need a plan. Debt Consolidation is a plan and it simplifies paying billsbesides providing youwith a reachable goal to meet finances every month.
When debt consolidation is not a good option
If you have made no plans for your spending habits and still you want to use your credit card for purchasing something, then debt consolidation would not be suitable for you. This way, the race of catching up with your bills would never come to an end. The decision to reduce debt is similar to that of reducing weight. The sooner you start the easier it would turn up later. But if your debt has already reached great heights then it not only turns overwhelming but embarrassing as well. In case of any situation like that, debt settlement and bankruptcy would be your only way out.