Debt consolidation for dealing with your multiple loan liabilities
Given the unsteady global economy and exponential rise in the standard costs of living, more people in this country than ever are being driven to borrowing in order to make ends meet. From auto loans to home mortgages, student loans and credit card loans, people are availing of them all and are consequently suffering the burden of a crippling debt that is hard to pay off! And while they struggle with their several loan liabilities, most people find it extremely bothersome to manage their multiple payments every month. For such people, debt consolidation is the answer to all their worries.
As the name suggests, debt consolidation typically implies taking out a new loan that takes care of all your multiple debt liabilities with a single payment installment every month. In other words, a debt consolidation loan allows you to club all your loan payments into a single installment that is both easy to keep track of and manage. There are majorly two kinds of debt consolidation loans namely secured and unsecured loans.
Unsecured Debt consolidation loans: Unsecured debt consolidation loans are not backed by collateral and therefore the lender has no right to seize your other financial assets in lieu of a defaulted payment.
Secured Debt Consolidation Loans: Also known as homeowner loans, secured debt consolidation loans are typically backed by collateral and are offered to borrowers who either have a massive debt to their name or have a poor credit history. The amount borrowed is secured against a major asset (usually your home) which can be seized by the lender if the borrower fails to make his payments.
Why you should consider Debt consolidation
- The one obvious aspect that makes debt consolidation such an attractive prospect is the fact that you get to manage all your debt liabilities via a single monthly payment. So, instead of having to worry about multiple payment amounts and their respective due dates, you can simply make a single consolidated payment towards all your debts every month and avoid any additional stress in life.
- Generally, the borrower can avail of a lower interest rate after consolidating his multiple debts. For instance, if you have a number of maxed out cards that you consolidate into a single debt, you will typically be paying a lesser amount as interest, since most credit cards have interest rates higher than all other forms of credit in the market.
- Having multiple debt liabilities to take care of every month can often lead to missed payments and crossed deadlines. However, since making a single consolidated payment every month will help you keep track of your due dates better, you can build and reestablish you credit score considerably.
- When you are unable to keep up with your loan repayment, you are bound to get harassed by the collection agencies. And multiple loans would imply multiple collectors’ calls. However, by consolidating your debt , you will be able to manage your finances better and consequently would not have to worry about any unwanted and terribly annoying calls from your collection agencies as well.