Has your frivolous spending landed you in a vicious circle of debt? Have your debts become unmanageable that you are having sleepless nights? Opt for debt consolidation, the best debt relief option to get you out of the debt trap.Understanding Debt ConsolidationDebt consolidation is the process of consolidating all the outstanding loans into one loan. The debt consolidation company gives a loan for the debt amount so that the debtor can pay off all his creditors. The debtor is therefore left with only one outstanding loan. This will make it easy for him to manage and repay the loan. Another advantage of going for a debt consolidation loan is that such loans are usually designed to help the debtor become debt free. Therefore, they have lesser interest rates and easy repayment period making them a better debt relief option.Debt Consolidation Loan OptionsVarious debt consolidation loan options are available to debtor for debt relief like1. Secured Debt Consolidation Loan: If the debtor has something that he can give as collateral, he can opt for a secured debt consolidation loan. Since he is giving security against the loan the interest rates for these types of loans is very less. The most popular of this type of loan is the home equity loan. The debtor gets the debt consolidation loan against the collateral of his house. He cannot default on payment because he will be risking his house if he does so.2. Unsecured Debt Consolidation Loan: If the debtor has nothing that he can give as collateral then he can opt for an unsecured debt consolidation loan. The advantage of this loan is that you will have only one creditor to pay off now. The amount repaid each moth goes both towards principal and interest unlike other debts were only the interest or principal is cleared and interest keeps adding on for the outstanding amount each month. However, one disadvantage is that since this loan is unsecured it charges a higher rate of interest compared to secured loan.3. Credit Card Debt Consolidation: The debtor can exchange all his credit cards for a low interest credit card. He pan pay off all his debts with this card. Interest on this card will be kept very low for a year reducing the debt burden of the debtor. After a year, normal interest is charged. This breather of one year must be utilized properly for becoming debt free.A debtor whose credit rating is undamaged and has the financial capability of repaying his debts, must always opt for debt consolidation compared to the other debt relief options available to him. This will give him a convenient repayment plan to become debt free without damaging his credit standing in the market.
