Types Of Government Loans For Debt Consolidation

Debt consolidation is the process of consolidating multiple loans into one and makes

only one payment to the consolidator of the loans who takes cares of previous lenders. Usually debt consolidation helps in lowering the interest rates and securing fixed interest rates for the borrower. However there are also government loans for debt consolidation that a prospective client looking for debt consolidation can also make use of.

Features of Debt Consolidation

Main features of debt consolidation are as follows.

- It is exchange of several unsecured loans with one consolidated unsecured loan.

- It does not absolve the borrower from the requirements of paying back the loans but often gets for them lower rates of interests and better loan payment options.

- Most often the loan is secured against some collateral that works as the security for the lender; and

- Collateralizing helps the borrower secure lower interest rates because they also agree to foreclosure by the new lender in case of inability to pay back even the consolidated single loan.

One of the major advantages of debt consolidation is that it helps the borrower to get rid of multiple payments spread over the month to different lenders and they start paying one premium to the one new lender, the consolidator.

Debt Consolidation Hassles

At times debt consolidation becomes a real hassle because many people do not have the money required to make that payment. Understanding such hassles of debt consolidation, government has put in place a system in which they provide a way for the borrower to pay off their debts without getting further debt problems. Government loans for debt consolidation can be one of the best ways of paying back the debts and for getting back to financial stability.

Understanding Features of Government Debt Consolidation Loans

It would be good understanding the features of government loans for debt consolidation.

- These loans are provided by government to pay off all the debts of a borrower in just one monthly payment.

- Borrower will request certain amount of loans from the government and pay back the same at low monthly rates.

- Government debt consolidation loans can be tricky but they help save people from a lot of distress that might result from obtaining private debt consolidation loans.

Types of Government Loans for Debt Consolidation

Multiple options are there for prospective clients for government debt consolidations. Main types are

- Standard payback in which the borrower will pay a set amount monthly till the loan is completely paid back;

- Extended payment plan that is used to increase the lifespan of loan obtained by gradually declining the amount of payment every month;

- Graduated payment plan that commences with low monthly rate till some predetermined time during which the monthly rate enhances; and

- Income contingent plan is one that takes the income of the borrower into account for deciding the monthly rate of repayment and can either make things better or worse depending on the current situation of the borrower.

Every prospective borrower will not be eligible for each of these plans but whichever plan they are eligible for, the borrower should make best use of the loan obtained.

by: Kevin Jeffers

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