Should you apply for a Debt Consolidation Loan?
Debt consolidation means adding your various debts together so that there is one outstanding amount rather than several. If you have more than two creditors then you should think seriously about consolidating your debts because at present you are paying more than one lot of interest. Most people who consolidate their debts take out a secured loan to pay off the people to whom they owe money, which leaves them with only one monthly payment to make. You need to be sure that if you take out a loan that is secured against your home and you fail to make the repayments, then you could have your house possessed by the lender; at the very least the lender may be entitled to claim some of the equity that is in your home.
Taking out a secured loan to pay off your debts is not the only way of consolidating them. You only have to take a brief look around the internet and you will see that there are various debt consolidation companies offering their services. If you are thinking about using a debt consolidation company to pay off your debts, then you should find out about the company you might want to use, before you commit yourself. You should know that most debt consolidation companies will charge you a fee for their service, and providing you know that to begin with it is not too bad.
How Debt Consolidation Works
If you have decided against taking out a loan or a second mortgage to pay off your debts, then once you have totalled up the entire amount you owe, you should see a debt consolidation counsellor. The person you see will help you to work out a budget that you can live with and will then assign a certain sum that you can afford to pay off your existing debts. One of the most convenient things about using a debt consolidation company is that you make one lump sum payment a month to the debt consolidation company, and they will use it to divide between your creditors, they may also include their own fee in this lump sum.
The agent from the debt consolidation company may wish to meet with you when you make the monthly payment, or they may decide that it is easier all round if you pay a certain amount of money to them either by cheque or by bank transfer, and leave them to pay off your creditors each month. Most companies that offer help with debt consolidation are honest and above board but there are instances where people have been conned. If you own your own property then you might do better with a secured loan that will enable you to pay off other creditors and just have the one payment each month.