What Are Personal Debt Consolidation Loans?
"Personal debt consolidation
loans" is an umbrella term for debts that round up all of a
person's existing debt and merges them into one debt account. Personal
consolidation loans are offered to debtors who are knee-deep in
debt. They are always offered at a lower interest rate than the
With multiple loans with varying, but always high,
interest rates, borrowers often have no way out of debt, except
for personal debt consolidation loans. Not only do they make it
possible consumers to get out of debt, they can also spell savings
in interest rates.
Personal debt consolidation loans can be had as
either as secured or unsecured loans. You have to attach an asset
like a house to qualify for a secured loan. Lenders then approve
a loan that is based on the equity value of the collateral. Because
of the collateral a person can have cheaper interest rates on the
For people who do not wish to submit collateral
to the lenders, an unsecured debt is the more appropriate debt to
take. Lenders typically grant unsecured debts in smaller amounts
and in shorter time periods. People who do not own homes or are
tenants can benefit from unsecured loans.
For people with bad debt, there are special debt
consolidation programs that are offered, but at a higher interest
rate. However, with timely payments, a person with a bad credit
score can easily improve his or her situation.
People with debts can actually negotiate for better
interest rates by gathering quotations and then haggling for best
interest rates using the rates of other lenders as leverage.
There are also personal consolidation loans that
are called cheap debt consolidation loans. Under these types of
loans, checking for credit worthiness is very minimal. All of a
person's debts are gathered and there only one date of repayment.
But of course, this type of loan consolidation is backed by collateral
and if you are not able to pay, you pay (with your collateral).
This type of loan consolidations do not involve banks, and people
with a bad credit score or are struggling to pay, are eligible for
these types of personal debt consolidation loans.
As more and more people are looking forward to
eliminating their excessive debts, debt consolidation companies
have responded and have, in fact, mushroomed. What consumer borrowers
have to know is that personal debt consolidation loans are exactly
that - loans that have to be paid.
In trying to weigh which debt consolidations are
the best, you should always consider the interest rates and payment
terms, i.e., how long or how short. The most important thing to
consider, however, are your needs. Have your debts really hit the
ceiling in terms of total amount and interest rates? Sometimes,
the best way to get out of debt is actually to avoid debt and save
as much as you can within a period of time and fast track your payments.
Personal debt consolidation loans, in sum
and as a whole, are just one way to get out of debt.