Debt Consolidation

What Debt consolidation is? What programs to use? What are advantages and disadvantages of using them? What should I know about them? Read answers for all these questions.

Debt consolidation is the action of consolidation several loans into one low-interest loan.

Debt consolidation program is usually your new big loan for paying off others. Sometimes consolidation debt is just a new unsecured debt, but more often it is secured: debtor pledge his home as collateral in debt consolidation program. In that case lendors risk is reduced, so the interest rate is low.

The main advange of debt consolidation is that debtor need to make only one payment every month and this payment is usually lower than the sum of all monthly payments, he made before, because the term of the debt is increased. Another advantage is that people can try to avoid bankruptcy.

But debt consolidation programs can also hurt debtor if he can’t understand that he owe the money and he will need to pay it back. After debt consolidation debtor will get more free money, available credits will increase, but if he will use them, his situation will be really bad. He can lose hos home if it was pleded as collateral.

For more information you can ask your local banks and credit unions. There are many debt consolidation programs and it is not easy to choose the best.