What is Debt Consolidation?
By Tim Gorman |
Debt consolidation may be the answer for anyone drowning in a sea of unpaid
bills. Debt consolidation lumps all of your unsecured debts including credit
card bills, doctor, dentist, veterinary, and other service provider bills – any
bills that are not secured by collateral or property such as an automobile or a
house – into one monthly payment.
Types of Debt
Consolidation
There are several ways to achieve debt
consolidation, including one that does not require borrowing more money. Debt
consolidation options include:
1. Home Equity Loans – A popular method of
debt consolidation, the home equity loan is a mortgage based on the amount of
equity you have invested in your home. It should be noted that home equity loans
are secured by your house, which means if you fail to make payments on schedule,
and according to the terms of the loan, you risk losing your house.
2.
Personal Loans – Many banks and other lenders offer unsecured personal loans
based on your annual income. The amount that can be borrowed will vary from
person to person, and not everyone will qualify for this type of loan. To use
personal loan proceeds for debt consolidation simply deposit the loan money into
your bank account and write checks to your creditors, or ask the lender to
disburse the money to your creditors for you.
3. Private Loans – Some
people may be able to borrow from family or friends and arrange very individual
terms. Borrowing from others in your personal life can be tricky business and it
is advisable to make sure any arrangements are made in writing.
4. Debt
Management Plans – Not everyone will qualify for a personal loan, and not
everyone owns a house, or has someone in their personal life from whom they can
borrow money for debt consolidation. For people in this situation there is
another option available - a debt management plan through a credit counseling
agency. Even if you have all of the previously mentioned options available to
you it may be more advisable to seek out a debt management plan. Debt
consolidation through a debt management plan involves having a credit counselor
negotiate with your creditors for payments you can afford. You end up making one
monthly payment to the credit counseling agency which then sends money to your
various creditors.
Regardless of which type of debt consolidation plan
you choose, be sure to check out potential lenders or your credit counseling
agencies thoroughly. It is also strongly advised that you destroy paid off
credit cards and formally close those accounts to avoid the temptation to charge
them up again. When done carefully and with consideration, debt consolidation
will ease your financial worries.
About the
Author
Timothy Gorman is a successful
webmaster and publisher of Debt-Relief-Solutions.com. He provides more debt
relief, consolidation and free debt consolidation information that you can
research in your pajamas on his website.
http://www.debt-relief-solutions.com/Debt-Consolidation.html
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