All About Debt Consolidation
What is debt consolidation? In a world plagued with financial dilemmas, money-management is the need of the hour. Loans have always come to one’s aid at the most critical hour but what if someone finds himself buried in an ocean of loans? It can be quite overwhelming to face a multitude of pending loan payments and this is exactly where debt consolidation comes into picture.
It basically refers to the act of taking one loan to pay off a number of debts, thus effectively converting a number of loans into a single one. There are a number of ways to achieve this. One method would be to consolidate the credit card bills onto a single credit card. Home equity loans also come in handy in such situations. The federal government also offers a number of loans for students, thus opening the option of consolidation.
Debt consolidations broadly falls into one of two categories: secured and unsecured loans. The former is secured by using an asset of loan borrower; it could be a car or real estate which has been mortgaged. This acts as a collateral for the debt. The latter is more difficult to obtain because it has no backing in the form of property or assets, thus leading to a higher interest rate and stringent qualifying terms. However, debt consolidation does not mean that the debts have become non-existent; they simply transfer to a different lender. The major benefit of such a scheme is that one stops getting repeated calls from multiple agencies and all the money gets pooled in a single place. Any bank, credit card company or financial firm would be willing to provide debt consolidation services provided one has a good history with them. After all, such firms are on the lookout for individuals seeking financial assistance, which is why it is a great idea to consult their experts before making an informed decision!