How does debt consolidation help?

If you have lots of debt that you cannot fix and you ask yourself "Is debt consolidation good?" the answer is 'yes'. Debt consolidation helps you by combining your multiple debts and paying them off regularly as one single payment. There are several ways in which you can get your debt consolidated. Some of them include:

•    Credit counseling
•    Balance transfers
•    Debt consolidation loans

Credit counseling: Also known as debt management companies, these work with your lenders and reorganize the unsecured debts. You can make one monthly payment instead of many that you owe. With debt relief plans you can receive many benefits like:

•    Reduced monthly payments
•    Lowered interest rates
•    No late fees

Balance transfers:  If you can get your debt transferred from a higher interest rate credit to a credit with lower rate of interest, you will have to pay a reduced amount. So, if you have a credit card that has a lower rate of interest you could think about transferring the balance to your credit card with lower interest. If not so, then you might even apply for a credit card with lower interest.

Debt consolidation loan: A debt consolidation loan is available at banks, credit unions and finance companies. These loans are available as i)Unsecured and ii) Secured loans.

What are the advantages of debt consolidation?

You can now clear your dues in a systematic manner and without having to rack your brains about how to manage your loan repayment. Your creditor will give you a repayment plan that you can afford. This is a better idea than not paying at all and losing chances of any further loan applications. Few of the advantages of debt consolidation include:

•    Lowered monthly payments: Your lender might agree on you paying a lowered amount than what you were paying. This way, your budget for home and other expenses too will not be strained. So it is advisable that you consolidate multiple payments in to one single payment and in an amount that is affordable to you.

•    Interest rate reduction: Your lender may agree to lower the rate of interest that you have been paying on your loan. If it is a home loan, you may borrow money against the amount due at a lower rate of interest. In simple terms you could also opt for a refinance loan to get a lower rate of interest.

•    A stretched repayment period: You could come to terms with your lender and seek a longer repayment term. This way you can lower the amount of monthly payments that you make. Maybe you will end up paying a little more than what you owe, but you can provide some relief to your pocket.