|
Debt consolidation is a process where you get a single loan to pay off all other smaller loans that you have. These results in making just one monthly payment compared to the several payments that were being made earlier. Money management also becomes easier. Debt consolidation can be done through secured loans as well as unsecured loans. Secured Loans for Debt Consolidation Debt consolidation through secured loans has many options available. You can get a loan by mortgaging your house or by using your car. You life insurance policy can also be used to obtain a loan. Other assets like your retirement fund, lottery winnings and annuities can also be used to obtain the debt consolidation loan. Secured debt consolidation loans offer lower interest rates than the unsecured loans and thus you end up paying lesser amount on interest. The lower interest rates result in lower monthly payments and thus better money management. Some of the secured loans are tax deductible. The secured loans are easier to be sanctioned as the money lender is at least risk in these cases. But the drawback of a secured loan is that when you pledge your property or asset for obtaining a loan, your property or asset is at risk. If you do not repay the loan, you will lose your house or car or whatever asset you have mortgaged during the time of obtaining the loan. The term of the loan may sometimes be very long and thus you will end up paying large amounts of interest. Unsecured loans for Debt Consolidation Unsecured debt consolidation loans are common but are not easily available. An unsecured loan demands that the borrower should have a good credit. These loans do not require any property or asset as security. The unsecured debt consolidation loan thus does not risk your property. The interest rates may be higher than that of the secured loans. This will result in high monthly payments thus making a difference in your monthly financial situation. Risks involved in Debt Consolidation Along with its many advantages, debt consolidation has a number of risks also. The debt consolidation program can turn out to be a short term solution to your problem of repayment of loans. This is because if you cannot manage to repay the new loan taken for debt consolidation then your financial crisis increases. These programs offer lower repayments for longer terms. But this can increase the amount of interest that you are paying. There are chances of having hidden fees such as penalty for late payment or payment defaults. Thus you end up paying more. The companies offering debt consolidation programs charge higher interest rates than the other banks. If you have chosen the wrong debt consolidation option then you end up increasing your monthly payments and also the interest on the debt. If you do not make your payments on time or complete the debt consolidation plan correctly you may end up damaging your credit. To reduce all these risks it is better to do a good research on the debt consolidation loan that you are signing up for and make sure that you have read all the terms and conditions well. If you manage your finances well and repay your loan on time, then you should not be facing any troubles. Author’s Bio: Author is an experienced content writer with many years of experience in the filed of finance. He has been appreciated for his many articles published online. Now he is providing information on debt consolidation help and debt consolidation loans in Australia.
Related Articles -
Debt Consolidation Help, Debt Consolidation Loans Australia,
| 
