Debt consolidation loans are popular for their ability to combine other debts in to one monthly payment. You’ve probably heard the endless television commercials about consolidating your outgoings, and there does seem to be a large market for this kind of financial action.
There are many reasons why you might wish to consolidate your debts. Consider the idea that you have several outgoings, all at different monthly fees, all with different deadlines to be received by. Is that going to help you sleep easily?
It can be a time consuming business to keep on top of a loan, and even more consuming to keep on top of several different debts. By consolidating, we can take out another loan and pile the debts together.
Don’t expect your outgoings to suddenly disappear in a puff of white smoke, we haven’t got that far yet. But it is a great way to loosen the responsibility on your shoulders and grab control of the situation.
Of course, there’s also the chance that your debts are working at different interest rates. Some may be fixed, others may be variable.
How are you maintain a budget when rates are skipping all over the place and you don’t know what’s what. By using debt consolidation, you can turn all those differing rates in to one single interest-rate.
It’s likely that the interest rate will be high, although you can get special 0% bonuses for set time frames. These act as an introductory incentive more than anything.
Both variable and fixed debt consolidation loans are available. Variable rates are by far the most actively used loans and they have the potential to go both up or down. It’s nice to know that only one of your repayments is gaining interest, rather than a whole filing cabinet full of them!
And once again, you can expect to find both secured and unsecured debt consolidation loans. If you have a mountain of debts to take care of, it’s likely that only a secured loan with be suffice.
These kind of loans offer extra money and lower interest rates - but they come with the additional burden of having to secure the loan. To secure a loan, you’ll have to link it to your assets , and normally your home.
Unsecured loans offer less money and are a good option for consolidating lots of mini-debts. They don’t come with the stress of having to tie your property in to the equation, and you have a certain degree of the flexibility.
What a lender is willing to offer you will be determined largely by your credit report. If you have a good history, you’re more likely to be offered an unsecured debt consolidation package. If your record is tainted, you could end up having to put your home at risk.
Debt consolidation offers peace of mind more than anything. It’ll take you longer to pay off your debts, but on a monthly basis, you’ll have much less to worry about. It’s also possible to make savings due to the consolidated interest.
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