Debt consolidation is considered one of the most helpful and borrower-friendly debt management methods. There are several different types of consolidation loans, so it is necessary that you know which is the most suitable for you. As you search for the right kind of consolidation loan, you must be honest about your financial situation, criteria, and needs. With debt consolidation loans for high debt, the biggest concerns of borrowers involve the loan term, interest rates, monthly payments, as well as any possible effects on your credit rating.
Types of Consolidation Loans
Debt Settlement and Conciliation
Debt conciliation or settlement is among the primary types of debt consolidation. In this plan, you can have your total debt reduced by as much as 50 percent because of significantly low monthly payments.
Typically, conciliation or debt settlement program is stretched over 2 or 3 years. If this is the method that you would like to try out, you should take into account what could be involved in the plan. You must understand that in this program, you are not going to be paying your creditors during an entire period of a debt settlement program. This means that it could have a serious effect on your credit score. Notwithstanding, debt settlement or conciliation is the cheapest and most effective way of getting low monthly payments for your loan.
Credit Analysis and Counseling
With a debt consolidation program, you will have to make the payment straight to your credit counseling agency. It will be the organization that will make payments to each of your creditors. Credit counseling is a service that is commonly offered by a lot of web based debt consolidation companies.
In general, credit counseling and analysis program is very important and valuable to borrowers as it can help them reduce their monthly payments. What these organizations do is get concessions on interest rates for the borrowers from lending companies or creditors. In most cases, online credit counseling and analysis plans run from 4 to 5 years.
Debt Consolidation Loans
It is perhaps the most popular and frequently chosen debt management program. By getting a debt consolidation loan, borrowers basically just get a single loan which is then used as a single payment for all the existing loans. By doing so, you will not have to pay off many different loans and creditors who will also charge you different interest rates. The only lender you are going to pay every month is your consolidation company.
Commonly, these loans are secured, which means that the borrower needs to put up some collateral. The equity of your house can be used for this purpose. With secured debt consolidation loans for high debt, you can benefit from the fact that you can use lower rates of interest. This is because your lender can just seize your property in case you fail to make the monthly repayments. So before opting for consolidation, make sure you are ready to take the risk of losing your home or any property.