What are Debt Consolidation Loans?

Secured versus unsecured

There is a massive difference between these two aspects. First, the secure option requires collateral. It could be your home or your car or other properties of considerable value. With this, you can borrow money, make minimum payments and get lower rates of interest. However, if you default on your debt, there is a high risk of losing your collateral. An unsecured debt simply means that you do not have collateral. It is a lot harder to get and there are higher interest rates applied and higher monthly payments. Nonetheless, you can make amends faster and secure your property.

Credit card balance transfer/ assistance

This type of consolidation allows all interest rates (low level) to be transferred into one single credit card. These transfers normally are short term and so they are not long term options. Nonetheless, within that period, you can minimize your debt and manage your repayment strategy. It is, however, highly advised to check the expiration of this offer. You also need your card to have a considerable limit so that you can handle most of your debts. This can be helpful but I could affect your credit rating since any form of debt is a minus to your score as you use up the credits.

Home Equity line of Credit

With this option, you can use the equity of your home. You can combine all your debts and create a single payment on the line of credit. Once the remaining balance has been paid for, you can utilize the LOC again. In this kind of loan, the equity becomes the collateral. Before doing this, make sure that you have considerable equity and that you have a good credit rating. It is a risky option but nonetheless, if you can make an assurance that the payments will be consistent, then you will be safe and your equity will be safe and your home will be risk free from foreclosures.

Debt consolidation

Ideally, this form of loan is designed to cut down on your debts by half by making monthly payments that are made lower to be in line with the capacity that the debtor is capable of paying. The repayment scheme normally lasts for 3 years or so that the repayment can be lowered every month. Not everybody can benefit from consolidation programs, it is ideal to check with an expert or a lawyer to see how you can best benefit from it. If not, then your most ideal scenario is filing for bankruptcy. It can be quite difficult to accept but it is necessary that you understand the whole situation before finally settling with your options.

Debt consolidation loans vary from person to person. Not everybody will get the same results. It is ideal to always get an expert opinion if you are not aware of these options. It is necessary that you are aware of your options so that you can effectively lower your debts be free from these issues. It takes research and a lot of reading before finally settling with the right options so really find the right options for your needs.