There are many different types of debt consolidation loans that may be of interest depending on your situation. The majority of debt consolidation loans takes a bunch of smaller unsecured loans and combines them into a bigger secured loan. The more collateral you are able to put up, the better the interest rate you receive will be. Therefore, you pay less interest over the term of the loan.
Debt consolidation works great if you have a lot of credit card payments that need to be made each month. By consolidating your debt you can lower the interest being paid on the money you’ve borrowed which will allow you to save more money because you will be paying less money in interest each month.
Unsecured Debt Consolidation Loans
In order to get a debt consolidation loan it is not necessary to have collateral, but your chances of getting a loan with a low interest rate are dramatically increased if there is collateral. With an unsecured debt consolidation loan the lender puts them self at risk. If the borrower defaults the lender cannot come in and take your home, or your car, or any other collateral that could have been used in a secured debt consolidation loan. That is why these debt instruments are usually reserved for people with good credit.
Debt Consolidation Loans for Bad Credit
Are you having a hard time keeping up with all of your payments? It can be very difficult to remember when every creditor owed has a bill coming due soon. Payments can be missed easily and payments can be made late. Debt consolidation loans for bad credit are a great way to get you back on your feet. The debt consolidation loan will combine all debts into one monthly payment and the payment will be due at the same time every month to prevent missed payments and late fees.
Bad credit debt consolidation loans can prevent bankruptcy from occurring in some of the more serious situations. Debt consolidation is the best alternative to bankruptcy and should be tried before even considering filing for bankruptcy.
Personal Loans for Debt Consolidation
If you have been making your car or home payments on time to your lender, a great option for debt consolidation is to apply for a personal loan. Personal loans for debt consolidation work very much like an unsecured debt consolidation, they are essentially the same thing really but the personal loan can be obtained from your bank pretty easily if you’ve been paying them on time.
I recommend building up a good rapport with your loan officer, as they will be the ones that ultimately decide whether giving you a loan is a good idea or not. I will say this also, even if you have bad credit, if you’ve always paid your bank lender, they will look past the credit history in most cases and still give you a personal loan. The interest rate on a personal loan is almost always less than the credit card interest rates.
Government Debt Consolidation Loans
There are a number of government debt consolidation loans available to the public. These loans work much like all debt consolidation instruments but the consolidation takes place by a government program. For the most part these federal government programs are for students that have education loans, credit cards and medical expenses. What happens is the Department of Education will actually pay off the student loan amount and then re-issue a new loan in the consolidated amount.