Debt consolidation ..How wonderful

Arak graduated from under the great responsibility

Why Debt Consolidation wonderful? ...It is a law to remove the burden, Managing debt in practical and innovative ways is an important part of personal finance. Multiple loans create headaches for you as your attention gets diverted by so many different loans all eating away huge chunks of hard earned cash through high interest rates. Many people remain ignorant of the practical solutions lying unutilized in different shades of debt consolidation like:

• Personal unsecured debt consolidation loans.
• Secured consolidation loans such as home equity loans, and
• Debt management programs.

In debt consolidation, the basic idea is to combine all your debts together into one single loan, under a single repayment program with much lower interest so that the omnibus loan becomes easier to manage, and easier to repay.

Unsecured (No Collateral) Debt Consolidation Loan

In this method an unsecured personal loan (meaning a loan without collateral) is availed in order to clear multiple debts. An essential prerequisite for this sort of loan is that your credit rating should be strong enough to ensure that you get a suitably lower interest rate. This in turn will have the effect of lowering the loan installments, making it easier on your pay packet. If you happen to fall in this category there are many loan options that banks and financial institutions offer. In this type of loan remember that the banker will be taking a higher risk (loan being unsecured) and therefore, the banker will insist on higher credit scores. This is ideal for clearing unsecured debts like multiple credit card dues outstanding.

Home (Property) Equity Loans

Such a loan is different from the unsecured loan in that the home or some other landed asset is marked as collateral for this loan. It becomes easier for the banker to permit lower interest rates unlike credit score linked unsecured loans. But this increases the risk for the borrower because a loan default may mean direct foreclosure. Risking your home for repaying credit card dues is too big a hazard to take on. Preferably this sort of loan should be used if you have multiple lending like car loans and business loans to repay that are more voluminous amount wise, and require softer extended repayment periods at lower rates of interest.

Debt Management (Debtor-Creditor) Program

Supposing your credit rating was just about normal with a couple of spots and you are in no mood to risk your home to repay dues, then what would you do? In such a situation one way out is to approach a credit counseling firm comprising of credit experts. These specialists will assess your financial situation, probe your creditors and decide a new debt management program that will put in place the ideal repayment arrangement. All you are required to do is to make a lump sum payment to the agency and they in turn negotiate repayment of the interest and principal directly with the creditors, while factoring in their own fees. Counselors will take you on even if you have bad credit.

The credit card balance transfer is a variation of the unsecured debt consolidation aiming to control credit card debt. In such a technique all that you do is transfer the balance outstanding from the highest interest bearing credit cards to a credit card having a lower interest rate. This way multiple high interest bearing balances can be conveniently shifted to lower interest cards thereby saving money that would otherwise be lost in loan buildup. The drawback is that the system operates like a credit card not like a loan and repayments will keep changing, and there is the likelihood of the balances attracting special APR (additional interest) provisions.

If you discover that there are no viable options left for considering debt consolidation, the next best thing to consider is debt settlement or debt negotiation. The advantage of this is that you can get hold of an attorney who can negotiate a reduced debt package (sometimes even as low as 50% of what you originally owe your creditors). This is generally expensive and has serious tax implications and can also carry legal baggage, and that leaves you considering Bankruptcy as the final and only viable option.