Definition and Types of Debt Consolidation Loan Plans

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Basically the definition of debt consolidation is quite simple. It means to group your debt under one package and make only a single payment to a single creditor. This would mean that you would need to get a loan to pay off all your creditors, so now you only owe the loan providers instead of multiple creditors. This is fast becoming a popular way to settle debts as it is the easiest and most direct approach to solving debt.This can either be done by debt management companies, or you could get a bank loan, you could borrow from families or friends or you could use a home equity loan. Either way, you will get to save money as your monthly payments will be lower considering that you will get a new repayment scheme and interest rates. Debt management companies will help you to lower your debt with creditors as they will negotiate your debt and at the same time ask you to stop paying your creditors. Instead you have to put the money that you are using to pay your creditors into another account and keep doing that until a settlement is reached and you can use the lump sum to pay the debt management company who will then pay your creditors.By using your home equity line of credit, you get the use the money via debit card, check book or credit card tied to that loan. This line of credit has adjustable interest rates and you pay the interest based on the amount you withdraw only. Normally this line of credit is for 10 to 20 years and after that there will be a fixed amount of time for the repayment. Just remember not to keep using your card to the max or will be deeper in debt and you might end up losing your house.The thing about consolidation loans is that they might or might not harm your credit score. You will need to do some research to determine which one will harm you and which will not. But if you can afford to lose a few points and you will be getting a good deal, why not?