Debt Consolidation Info
Debt consolidation can be an option for debtors who are having a difficult time making payments. Consolidation will allow you to combine multiple loans into one, possibly lowering the overall interest rate you are paying and allowing you to maintain your credit rating by providing you with a payment that you can afford.
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Debt Consolidation Without Collateral
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To consolidate without collateral, you must talk one of your creditors into accepting your other unsecured debt. The lender will provide the funds to pay off your other loans and you will make one monthly payment to the lender. While the payment and interest can be lower than what you have been paying, the length of the loan can be longer. This means that you will pay more in the long-term through consolidation.
Debt Consolidation With Collateral
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Using your home or other property for a consolidation loan can be a way to pay off all your unsecured debt if you have available equity. Like consolidation without collateral, you can have a loan with lower interest, lower payments and longer terms. You may be able to claim the amount of interest you pay as a tax deduction. The disadvantage to using collateral is that you can lose your property if you cannot make your payments.
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Debt Counseling Consolidation
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Some debt counseling services offer customers the ability to consolidate all of your unsecured debt into one large debt. You then make your payment to the counseling service that makes the payment for the large debt. The service may be able to offer a lower interest rate than you are currently paying but you will pay a monthly fee for the service.
Considerations
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Typically, you will only be able to consolidate your debt yourself if your credit score is high. If you are making your payments late, have missed payments or have a large amount of debt compared to your income, you may not qualify for consolidation without using a counseling service. The government regulates counseling services and the Department of Justice provides a list of acceptable companies.
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