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You may be surprised at how much you can achieve without the help of a debt management company. Many people negotiate reduced payments with their creditors even getting them to freeze interest and charges on their accounts. If you have decided to go it alone, the following article will provide you with valuable advice on how to do this successfully.
Types of debt consolidation loans
A debt consolidation loan can be either secured or unsecured.
Secured debt consolidation loans
As secured debt consolidation loans are considered lower risk, it is usually possible to borrow more money over a longer period of time and getter a better interest rate. To get a secured debt consolidation loan, you would need something to secure the loan on, such as your home. You need to bear in mind that if you do not keep up with the repayments on such a loan, your home can be repossessed.
Advantages of a secured debt consolidation loan
- Borrow more money
- Choose a longer payment period
- Get a better interest rate
- Lower monthly payments
- Accepted even with a bad credit history
Disadvantages of a secured debt consolidation loan
- The longer your payment period the more interest you pay
- Risk losing your home if you cannot keep up the repayments
Unsecured debt consolidation loans
To get an unsecured debt consolidation loan, you do not have to be a homeowner. As no property is used to secure the loan against, it is considered higher risk to the lender. This usually means the amount you can borrow is lower than that of a secured debt consolidation loan, and the length of time you can repay the loan over is also significantly shorter.
Advantages of an unsecured debt consolidation loan
- The shorter the payment period, the less you pay in interest
- No risk of losing your home
Disadvantages of an unsecured debt consolidation loan
- Amount you can borrow is lower
- Payment period is shorter
- Higher interest rates
- Sometimes restricted on how you spend the money
- Struggle to get accepted with a poor credit history
The above information is just a guide. Individual loans and the terms associated with them vary considerably from lender to lender. If you want more information on debt consolidation loans and other related topics, use some of the helpful links below. Alternatively, visit our comprehensive directory for a list of companies offering debt consolidation loans.
Helpful debt consolidation loan links
Debt consolidation
Can I get a debt consolidation loan with bad credit?
Getting the best debt consolidation loan
Debt consolidation alternatives
Remember, Debt Advice 4 Free is a completely free, impartial service. Although the information on this website is provided by industry experts, it should never replace the advice of a debt adviser who understands your individual circumstances. You can visit the directory section of this website to find a list of companies offering these services.
What is debt consolidation?
Debt consolidation simply means replacing multiple loans with one new loan. If you have debts with different creditors, you can combine them into one loan using a debt consolidation loan.