Debt Consolidation Loans

Debt consolidation loans are a potential source of relief from multiple debt payments. You might be able to make just one payment each month instead of multiple payments on other credit or loan accounts. A bank or loan company may offer a variety of consolidation options.

Unsecured Consolidation Loan

A personal loan may be approved that could be used to pay off other debt balances. Some personal loans may be large enough to repay all of your credit card and small loan balances.

These usually are installment loans that require a set monthly payment over a predetermined number of months. An alternative is an unsecured line of credit, which may require a lower minimum payment as you repay a portion of the balance.

Secured Consolidation Loan

Lenders may require collateral to secure the loan. This could be property that you pledge to the lender if you default on the loan.

Collateral could be an item of value, such as a vehicle or boat. These tend to have high rates of interest and are referred to as title loans. The amount that may be borrowed against the property may be limited.

Real estate is the most common form of collateral for a consolidation loan. Your lender may allow you to access the equity that you have built in your home at a lower rate than an unsecured consolidation loan would allow. You may even have some tax benefits to doing so.

You do need to be careful to make sure that you do not get in debt deeper as a result of a consolidation loan. The purpose is to allow you to repay your debt faster through lower interest rates. If you end up with an extra loan payment and max out your credit cards, then you could end up in worse shape.