Debt consolidation is a way to receive one single loan to pay off small debts, which allows you to have a single monthly payment as opposed to several. The ultimate goal with debt consolidation is to lower your interest rate and monthly payment all while you are also paying off your debt at a faster rate.
Unlike debt settlement, which is paying a creditor less than you owe (a huge downfall for your credit), debt consolidation allows you to pay your debt with no negative influence on your credit. There are two ways you can approach debt consolidation and that is through the use of either secured or unsecured loans.
A secured loan is when you the debtor pledge your own property to secure the repayment of your loan. This can include things like your home or your car. Keep in mind that with a secured loan, if you fall behind your home could be foreclosed. An obvious pro to taking out a secured loan is the lower interest rate, however you are risking a lot of collateral that you rely on to live and survive i.e. your home.
Unsecured loans are based on your promise to repay your debts and none of your property is tied to that promise. Unsecured loans can include things like the use of a credit card. Keep in mind that with unsecured loans you the debtor are more at risk because it carries a higher interest rate and it is much harder to obtain an unsecured loan if you do not have great credit.
If you are unsure about eligibility for debt consolidation, contact a bankruptcy attorney to get your questions/concerns answered. Debt consolidation could be a way to have some peace of mind about financial debt. It gives you a chance to view your debts as singular instead of several, which makes it more manageable.
