If you are busy running around after kids, you don’t have time to keep track of all your credit card bills. It is much more manageable and even cheaper to use a debt consolidation service to consolidate your credit card debt. The payments will be simpler, and the interest rate can be much lower, saving you thousands of dollars.
How It Works: A consolidation loan is simply one loan that you create in order to pay off several debts. By creating a consolidation loan, your new lender will pay off your debts and allow you to repay them. The benefits of this loan is that it can give you a better interest rate than your separate loans. A better interest rate is especially possible with credit card debt, as these interest rates can run high.
Types of Loans: There are two types of loans: secured and unsecured. A secured loan is a loan that has an asset, such your house, as its security. This can take the form of a home equity loan or a second mortgage. Because this type of loan has more security for the bank, it may come with a lower interest rate. However, if you default on this loan, the lender can seize your house. An unsecured loan does not risk any of your assets, but it may come with a higher interest rate, especially if you have a bad credit score. Be sure to look into all of your options for the loans available to you.
Who is Eligible: Anyone can apply for a consolidation loan. However, in order to get a good interest rate on an unsecured consolidation loan, you need to have a good credit score, as the best and safest interest rates will be with unsecured loans. However, debt consolidation is a good option to consider for anyone who wants a simpler and potentially less expensive way to pay of their credit card debt.