Wednesday, November 29, 2006

Debt Consolidation Loans ? A Life Saver in the Sea of Debt

Debt problem has become a serious problem in the UK. People are taking out all kinds of loans ? secured loans, unsecured loans, personal loans, car loans, home improvement loans, etc. People are using their credit cards recklessly. Personal loans and credit cards charge a very high rate of interest. More and more people are now filing for bankruptcy. Personal as well as corporate insolvencies are on the rise. If you are also suffering from a severe debt problem, then you must start thinking about debt consolidation.

Debt consolidation is required when you are no longer in a position to repay your loans and credit card dues. The rate of interest is very high and the interest keeps on accumulating. The original loan amount is not such a big problem but the interest burden becomes too much to bear. In this situation, you need to take out a debt consolidation loan. It helps you to avoid bankruptcy.

The biggest benefit of a debt consolidation loans is that it reduces your interest burden. The rate of interest on a debt consolidation loan is lower than the rate on unsecured loans. This allows you to pay small monthly installments. Debt consolidation loans can help you manage your debt more easily as you will have only one creditor to repay the loan to.

Apart from benefits, Debt Consolidation Loans also have some disadvantages. If a debt consolidation loan is secured against your property, the lender may repossess your property if you fail to repay the loan. If you take out a long term debt consolidation loan, you will end up paying a large amount of interest. When you consolidate your debt, you repay your existing loans before the expiry of their loan period. Some lenders charge early repayment penalty.

Debt consolidation loans are secured and unsecured. Secured debt consolidation loans are secured against a property. If you are a homeowner, you can use your house to obtain a debt consolidation loan. You can also get a personal loan, which is usually unsecured, to consolidate your debt. The rate of interest on secured loans is lower than the rate on unsecured loans

Debt consolidation: an opportunity to mend credit status

Debt consolidation is just the merging of all the debts .Debt consolidation can be done through various methods, by taking out debt consolidation loans, debt consolidation mortgage, debt consolidation remortgage or even through debt counseling. Debt consolidation loan offers an opportunity to consolidate all your loans in one manageable loan. Debt consolidation program offers an opportunity to pay off all the bills and multiple loans in one easy installment. It also offers cheaper debt resolution options to the borrower.

Some people think that debt consolidation reduces the amount of the whole debt. But that is not true. The amount of debt never reduces overnight. Only the interest rates are reduced. Debt consolidation loan is provided by various banks and credit unions. Debt consolidation loans are used for variety of purposes. While availing debt consolidation loan, you don't have to specify the purpose of it.

Debt consolidation loan comes in two forms: unsecured and secured debt consolidation loan. Secured debt consolidation loan can be obtained by offering collateral. Amount approved will depend on the equity value of the collateral only. There is no need of offering any collateral in order to get unsecured debt consolidation loan. The rate of interest depends on borrower's credit score and financial position.

Debt consolidation loans can be availed even if you have bad credit history. In fact, it provides an opportunity to mend the credit status of a borrower. If you follow any debt consolidation program, eventually you will get rid of getting calls from many creditors. Debt consolidation will allow you to deal with a single creditor.

The author is a business writer specializing in finance and credit products and has written authoritative articles on the finance industry. He has done his masters in Business Administration and is currently assisting adverse-credit-debt-consolidation.co.uk as a finance specialist.