Does it seem like your daily mail always brings a new bill?
Are you struggling to make the minimum monthly payments on
your credit cards? If so, you aren't alone. Every day,
people are faced with debt that seems to be quickly gaining
the upper hand. If this sounds familiar, it may be time to
consider the possibility that a debt consolidation loan
could be the answer.
You may be wondering what the difference is between debt
consolidation and a debt consolidation loan. The term debt
consolidation is often used to describe a service offered
by non-profit organizations to combine your debts into one
monthly payment, but without being granted an actual loan.
A debt consolidation loan is an actual loan that does not
require you to enter a debt counseling program or turn your
finances over to someone else.
One of the leading reasons that individuals apply for debt
consolidation loans is their desire to get ride of high
interest credit cards. With monthly payments that often
barely cover the interest rates, which can increase at any
time, credit cards account for a large portion of consumer
debt. A debt consolidation loan can not only offer a
single monthly payment, but it can also offer lower
interest rates.
A debt consolidation loan is much like any other loan. A
standard application will request contact information, the
applicant's social security number, employment information
and permission to access a credit report. In some cases,
depending on the amount requested for a debt consolidation
loan, the lender may also request collateral. This would
be common if the amount of debt to be consolidated were
extremely high or if the applicant has a very low credit
score. Applicants should carefully consider the type of
collateral granted for a debt consolidation loan,
especially if the lender requests that the applicant's
residence be used. If credit card debt is the main reason
for a debt consolidation loan and if that loan uses a home
as collateral, the applicant is basically turning unsecured
credit card debt into secured debt with their home as the
collateral. If something should occur in the future and
the payments cannot be made, the applicant runs the risk of
losing his/her home. If collateral is not available, some
lenders may agree to issue the debt consolidation loan if
the applicant has a co-signer.
After being granted a debt consolidation loan and once all
credit cards are paid in full, many experts have
recommended closing credit card accounts to avoid having
the temptation of using them again. If the debt problem
arose from excessive spending, the temptation of having
available credit may be too great of a risk to bare. It is
advisable to keep one credit card open for emergency
purposes and, if possible, this card should carry the
lowest interest and no annual fee. A debt consolidation
loan is designed to help individuals regain control over
their finances and, if used correctly, save some extra
money in the process.
The information contained in this article is designed to be
used for reference purposes only. It should not be used
as, in place of or in conjunction with professional
financial advice relating to debt consolidation loans. For
additional information or to apply for a debt consolidation
loan, check with a lender who specializes in this type of
loan.
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Andrew Daigle is an author and creator of many
informational websites including
http://www.personal-payday-student-loans.com for different
types of loans and
http://www.auto-insurance-quotes-cheap.com for the cheapest
auto insurance, and many more.
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