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What is Debt Consolidation?
by Tim Gorman
Debt consolidation may be the answer for anyone
drowning in a sea of unpaid bills. Debt consolidation lumps all of your
unsecured debts including credit card bills, doctor, dentist,
veterinary, and other service provider bills – any bills that are not
secured by collateral or property such as an automobile or a house –
into one monthly payment.
Types of Debt Consolidation
There are several ways to achieve debt consolidation, including one that
does not require borrowing more money. Debt consolidation options
include:
1. Home Equity Loans – A popular method of debt consolidation, the home
equity loan is a mortgage based on the amount of equity you have
invested in your home. It should be noted that home equity loans are
secured by your house, which means if you fail to make payments on
schedule, and according to the terms of the loan, you risk losing your
house.
2. Personal Loans – Many banks and other lenders offer unsecured
personal loans based on your annual income. The amount that can be
borrowed will vary from person to person, and not everyone will qualify
for this type of loan. To use personal loan proceeds for debt
consolidation simply deposit the loan money into your bank account and
write checks to your creditors, or ask the lender to disburse the money
to your creditors for you.
3. Private Loans – Some people may be able to borrow from family or
friends and arrange very individual terms. Borrowing from others in your
personal life can be tricky business and it is advisable to make sure
any arrangements are made in writing.
4. Debt Management Plans – Not everyone will qualify for a personal
loan, and not everyone owns a house, or has someone in their personal
life from whom they can borrow money for debt consolidation. For people
in this situation there is another option available - a debt management
plan through a credit counselling agency. Even if you have all of the
previously mentioned options available to you it may be more advisable
to seek out a debt management plan. Debt consolidation through a debt
management plan involves having a credit counsellor negotiate with your
creditors for payments you can afford. You end up making one monthly
payment to the credit counselling agency which then sends money to your
various creditors.
Regardless of which type of debt consolidation plan you choose, be sure
to check out potential lenders or your credit counselling agencies
thoroughly. It is also strongly advised that you destroy paid off credit
cards and formally close those accounts to avoid the temptation to
charge them up again. When done carefully and with consideration, debt
consolidation will ease your financial worries.
About the Author
Timothy Gorman is a successful webmaster and
publisher of Debt-Relief-Solutions.com. He provides more debt relief,
consolidation and free debt consolidation information that you
can research in your pyjamas on his website.
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