Monday, February 25, 2008

Debt Consolidation Loans

Debt Consolidation Loans
What is a Consolidation Loan? - Debt consolidation involves
procuring a loan in order to clear or pay off other pending
debts or loans. A debt consolidation loan usually comes
outfitted with lower interest rates as well as a fixed
interest rate on the consolidated loan. The consolidated
loan may constitute consolidating various unsecured loans
into another unsecured loan or a secured loan against an
asset.

Who is an ideal candidate?

Any person who has incurred multiple debts and is unable to
manage the monthly repayments is an ideal candidate for
debt consolidation loans. The consolidation loan offers a
better interest rate as opposed to the interest rates that
the debtor would be paying on multiple debts. Moreover, the
debtor is able to reduce the debt considerably and pay off
the debt rather quickly.

Advantages of a consolidation loan

The primary and most distinguishable advantage of debt
consolidation is that the person gets a chance to live a
life of financial freedom by paying off all pending debts
and consolidating all the outstanding debts into a single
loan. This comes with a low interest rate and is able to
pay back the consolidated loan much faster.

There are many debt consolidation organizations out there
that would be ready to assist you with various queries and
help you find the best possible package at low interest
rates. It is advisable to seek the advice of a financial
advisor and thoroughly scour the market for a reliable debt
consolidation company.

Furthermore, consolidation loans help the debtor to manage
their payments more efficiently. Moreover, it also
eliminates the hassles of making multiple repayments or
overshooting the repayment date. The debtor is more in
control of his finances and is able to develop a practical
and workable budget.

There's more to a consolidation loan. It also allows the
debtor to extend the loan term; thereby minimising the
total monthly repayments. In the event that the debtor has
incurred interest-free debt and happens to miss the final
deadline of the payment, then they are liable to increased
interest rates. With the home equity loan; the interest is
tax deductible.

Another advantage of debt consolidation is that with timely
monthly repayments; the debtor's credit rating is enhanced.
While paying off multiple debts is not only inconvenient
and heavy on your wallet, skipping the due payment date
could adversely affect the credit rating; which is highly
undesirable for a debtor.

It is however best to exercise caution and research well
before signing any kind of deal. Also note that debt
consolidation is not a quick fix to your financial woes and
the person is advised to change their spending habits lest
they find themselves in another debt.

Also, if you consider extending the loan term period, the
total debt may also increase. It is always wise to get a
home equity loan to consolidate consumer debt.

To secure a financial future, debt consolidation is an
ideal alternative. However, it is vital to tread carefully
and read the terms and conditions in its entirety.


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Richard Greenwood is founder of
http://www.compareyourbank.com.au which allows users to
review and compare banking products including personal
loans.

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