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.
Timothy Gorman is a successful Webmaster and publisher of
Debt-Relief-Solutions.com. He provides more debt relief, credit counseling,
repair and
free debt consolidation information that you can research in your
pajamas on his website.
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