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Secured Debt Consolidation Explained |
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Submitted by Cheryl Adams
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When people are faced with a lot of debt, whether from credit card, department store cards or some other form of consumer credit, the best solution for paying it off is often to consolidate all the balances with a single loan. In most cases, these consolidation loans are secured by some sort of collateral, such as a house or car.
There are a number of ways to find a consolidation loan. There are agencies and services in most larger cities, as well as on the internet, that deal specifically with debt consolidation.
When you're in the early stages and still researching the different options, the internet is a valuable resource. There are lots of websites where you can get in-depth information about debt consolidation and it is easy to compare services when choosing an agency to help.
When you consolidate multiple debts into a single consolidation loan, it means you only need to make a single payment every month instead of one to each of the creditors. The interest is almost always lower on these loans as well, so over the time it takes to pay it off you can save a lot of money in interest costs.
When you're looking for a consolidation loan, your credit score will have a bearing on how easy it is to find. If you have a poor credit score, you will likely have to secure your loan with appropriate collateral and you may have to pay a higher interest rate than someone with a better credit rating.
Collateral is usually some type of personal property that has a significant value, equal to or greater than the amount of the loan. Obviously, the value of your collateral will affect the size of consolidation loan you will qualify for.
Once your consolidation loan is in place, all your current credit cards and other creditors will be paid off, leaving you with a single payment to manage every month. At this point the most important thing is to pay that off as quickly as possible, and not charge up more debt on your credit cards.
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