Are you struggling to keep track of all your debt?
Do you dread the end of the month because of all the bills you have to pay? Or are you simply unable to meet the minimum required monthly payments?
If you have answered yes to one or even all of the above questions, then it is time that you might want to consider debt consolidation loan.
So what exactly is debt consolidation?
Debt consolidation is the process where you take all of your debt and you combine them into one big single loan. This meaning that you will have one loan that pays off your other loans.
There are 3 main types of debt consolidation loans that you can choose from.
1. Secured Loans
This is a loan where you use an asset as collateral to secure the loan. The asset is usually your home or vehicle.
2. Unsecured Loans
This is sometimes the safer option, since you don’t use a very important asset as collateral. Unsecured loans can be in the form of personal loans, student loans etc…
Of course there are both advantages and disadvantages with both types of loans.
Secured vs Unsecured Loans
- Lower interest rate
- Smaller monthly payment
- BUT, risk of losing your asset
- Higher interest rate
- Don’t risk an asset
- BUT, shorter payment terms
3. Credit Card Transfers
This is usually when you transfer all of your credit card balances onto one single credit card.
Just remember that you need a credit card that has a high enough credit limit, in order to hold all of the debt. The downside to this type of consolidation is that it might have a negative impact on your credit score.
Debt consolidation is not for everyone.
Most people who consider this option might already be in a bad financial situation. If you are under the impression that debt consolidation will help you get rid of your debt, you may have the wrong idea.
It is mainly a short-term fix – your debt is still there, so you can basically say you’ve just moved it. Make sure that you carefully consider all the aspects of debt consolidation.
There might even be a much easier solution to your financial problems.