The consolidation of your debt is preferable since you get to talk to multiple creditors you took loans from and consolidate their debt in a single package payable to only one creditor. Having only one monthly payment is better than having to make several small ones. Furthermore, when applying for a debt consolidation loan, your monthly payment will be smaller in size than the sum of all your previous smaller monthly rates at the cost of a longer period of payment. If you’re in financial difficulty, a Debt Consolidation plan might give you less headaches than multiple payments.
There are several ways to go with a debt consolidation loan if you want to take this route. There are different types of loans for debt consolidation and the first one would be an unsecured loan obtainable from your building society or bank. You won’t have to use your home or automobile as a collateral, and if you fail to make payment the lender will not be able to repossess said house or car. Having an unsecured loan also means not having to worry about repossessions, but the interest rate will be higher in these cases.
Having a secured loan means there is something placed as a collateral to ensure the lender gets his money back. Collateral is usually something of high value, such as an apartment, house or a vehicle you own. When using a collateral, if you fail to make payment the lender will come and repossess your house or car.
There is also a third type of loan called a re-mortgage loan. The interest rate is lower but this interest rate is usually in value the same as your mortgage rate. The payment of your re-mortgage has to be paid over the same period of time as your mortgage and you will have to pay more in interest. Secondly, if you are unable to make payment you could lose your house.
There are few things worth mentioning if you have in mind a debt consolidation loan. One of them is you should ask for your payoff balance so you can analyze it and be assured it doesn’t include charges or penalties. Also, before signing anything you have to make sure you have the means to sustain this new debt consolidation plan, contingencies and emergencies included.