Debt Consolidation Facts

Debt consolidation refers to the process of replacing a series of loans with a single loan. There are a number of advantages in doing this. One particular advantage is that the interest charged on the single loan is likely to be substantially less than the interest charged on the smaller ones. Additionally, it is far easier to manage a single loan repayment than it is to maintain multiple repayments. A third, and very important advantage, is that the actually monthly amount to be repaid may be less than the sum of the multiple payments, though of course if this is the case it will take longer to repay the loan and the total amount to be repaid is likely to be greater.

The multiple loans are generally unsecured loans, and the single loan that replaces them may be either unsecured or secured. If it is secured against an asset, such as a home, then it is likely that the interest rate will be considerably less than on an unsecured loan; the downside to this is that your home could be at risk if you fail to maintain the agreed repayments.

Where debt consolidation is of particular value is for people with multiple credit card debts. The level of minimum repayment on credit card debts combined with the very high rates of interest that are charged mean that it could take very many years to clear the balance if only minimum repayments are made. In such cases it is almost always better to opt for debt consolidation.

Debt consolidation solutions are not available to everybody and it is generally necessary and certainly advisable to seek help from debt consolidation experts to see if it is the right solution for you. For instance if you have a poor credit rating due to missed credit card payments then it might be very difficult to obtain an unsecured loan. If debt consolidation is not appropriate for you, then the experts will also be able to advise you of other options that are available to you for getting out of debt.