When people are in debt it’s typically because they’ve run out of options for money and can’t think of a way out. Debt consolidation is one of the best solutions to your debt problems. In the simplest of terms, the process involved with debt consolidation allows you to gather all of your debts together into one, lower interest rate loan. Debt consolidation is generally new debt but the end goal is for this new loan to pay off previous loans and many find it a great deal of help. Debt consolidation can ensure a lower interest rate and it can be an ideal money saver, it can help you to keep up a good credit score, and it can lower your monthly payments.  Contact 4ukdebtconsolidation.co.uk for Debt Consolidation Advice.

Types of Debt Consolidation

Unsecured Debt Consolidation can involve the following:

1. Bank debt consolidation loans

2. Credit union debt consolidation loans

3. Credit card loans

4. Personal loans

Unsecured debt is a type of debt that has no assets attached; therefore, lenders cannot seize anything for repayment, they instead have to wait until the borrower pays. For this interest rates are high and unsecured debt consolidation can help you pay off these loans sooner rather than later when the interest rates are sky high.

Secured Debt Consolidation can involve the following:

>Home equity loans

>Car loans

Secured loans have lower interest rates, generally because the lender has an asset he can take for repayment as collateral in the case that debt isn’t taken care of.  Secured debts will ruin your credit at a rapid rate if not handled, because although the interest rates are lower the initially debt amount is normally high because of the price of the asset.  Secured debt consolidation works fast, but first speak to a professional about managing your debt.

Homeowners

Homeowners may open a home equity line of credit to access money for their debt. However, they also may pursue refinancing their mortgage, which is an alternative that holds merit. This process is typically done to add an asset to unsecured debt turning it into a secured debt with lower interest rates.      

Pursuing Lenders

There are many online lenders where you can apply for a loan. On your pursuit to financial freedom take with you a checklist to make sure that you are truly being helped and not climbing into deeper debt. Consider two important things when applying.

1. Interest rate –It is important that your new interest rate has a reasonably lower interest rate than the current rates of your debt. This way you save money and you get out of debt faster.

2. Payback period – Ask for the details to the payback period, and determine if you will be able to meet the requirements. This way you are on a debt management plan to ensure that your credit is still in the positive. Be very careful and very cautious when discussing debt consolidation methods, because you want your outcome to benefit you as much as possible.

Sources

http://www.debt.org/consolidation/

http://www.credit.com/credit_information/debt_help/Top-10-Ways-to-Make-Debt-Consolidation-Work-for-You.jsp

http://money.howstuffworks.com/personal-finance/debt-management/debt-consolidation.htm