Debt Consolidation and Relief

Credit counseling agencies offer some relief and techniques of coping with overwhelming debts through their debt consolidating programs called debt management plans that can enable you get back on track. Here are some of the facts that you ought to know about consolidating debt accounts through an agency; 1) Before consolidation, you are supposed to have gone through a counseling process, you should not consolidate bills if you can not pay for basic expenses or if there exist better alternatives. This is the main reason why the whole consolidation process begins with a counseling appointment whereby your financial situation is assessed and analyzed. 2) It is steady and efficient, whenever you are on the plan, your payments are constant throughout the period. You do not have to wonder the amount you should be paying each month since it will be the same amount until the period all the creditors will have been satisfied. 3) You still have got work to do, the individuals that you owe will continue sending you account statements which you will have to monitor each time they send you.

There exists three main types of debt relief options that are available, these are; Debt management plan and Debt settlement, Debt consolidation loans and Student loan consolidation. Debt consolidation can offer some relief in some ways among them; Lower your interest rates, lower your monthly payments, protect your credit rating and help you get out of debt easily.

A debt consolidation loan is a special type of financing that is extended to individuals who have multiple debts and thus enabling them to combine all their debts into a single new loan. Debt consolidation loans can be used to consolidate many types of personal loans and the most common one is the credit card debt.

It is not advisable to consolidate your debts by taking out a single large loan or a loan secured against an asset for instance a house to pay off a collection of smaller loans or accounts. This is because you risk losing it if you default on paying back the loan.

Benefits

Whenever you take out a consolidation loan, you are paying your debts in full and the new loan is established in another place. These are some of the benefits of taking out a consolidation loan; 1) It allows you to make one monthly payment to a single source. 2) It gives you the opportunity to improve your source of credit over time by ensuring that you make timely payments. 3) It reduces the number of collection calls you may have to receive from multiple creditors.

There are two main types of consolidation loans which are the secured and the unsecured debt consolidation loans. Unsecured loans are not tied to an asset and they majorly depend on your credit history while for secured loans, they are tied to an asset for instance; a house, car or any other kind of property that can be used as a collateral in case you default on your loan. The advantages of a secured loan are that it is easier to obtain from the lender, has low interest rate and a large amount can be borrowed. It also has some disadvantages that include the risk of losing an asset and have longer repayment terms which result in higher cost of interest.