subject: An Overview Of Unsecured Debt Consolidation [print this page] Do you have questions about debt consolidation? Debt consolidation is obtaining a loan to pay off one or more other loans. The right way to do this is to use the debt consolidation loan to pay off several other high-interest debts, such as credit cards, personal loans, or other higher-interest loans.
You can get either unsecured loans (like a personal loan) or secured loans (secured by a mortgage on your house or a lien on your car). With a secured loan, especially a loan secured by a mortgage, you can get a much lower rate of interest than you can with an unsecured loan.
This could be very important because getting a debt consolidation loan can be a problem. Getting a debt consolidation loan is not free. And usually the person who needs the loan is in the worst position to get the loan he needs. The person applying for the loan may have a poor credit rating score already. And getting a new loan can be very difficult and expensive. Debt consolidation loans often have fees, title insurance, etc. You can incur significant expense.
A way to use a debt consolidation loan is to use the extra money in your budget (from the lower interest loan) payments to pay off your debt in advance. When you borrow at a lower interest rate, you could find that you have extra money. You must change your thinking at this point. Be sure to use that extra money to make advance payments on your consolidation loan. That way you will be actually reducing your debt. When you apply for the loan, make sure you are allowed to make extra payments on the principal.
If you want some other alternatives, you have a lot of good alternatives to manage your heaviest debts. Examine your monthly budget with a view to reducing your debts. If you adopt a more sensible lifestyle, you can put more money toward paying off your existing debt. Another thing to do is to stop using your credit cards.Consolidation loans have several benefits: first, the debt consolidation loan has a reduced interest rate compared to the other loans. A debt consolidation loan can be obtained for less than twelve-percent interest, while credit cards often bear interest rates as high as 20 percent or higher.
