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What Is The Best Type Of Debt Consolidation Loan |
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Submitted by Cheryl Adams
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Various debts and multiple interest rates can get out of control very quickly. With various loan repayments to meet and high interest rates it may seem that your finances are spiraling out of control.
The good news is that there's no need to fret too much because financial programs are widely available for you. Many financial institutions out there offer a special type of loan to relieve financial stress. It is a debt consolidation loan.
A debt consolidation loan can come in two flavours - regular or an accelerated.
Typically, both a regular and an accelerated consolidation program will take care of your debts to other creditors.
Financial institutions who offer this do the negotiations with your current lenders for you. Negotiations may include lowering your payments, or better still complete settlement by taking over your debt and restructuring your payment terms. This provides you with the benefit of eliminating your debts faster.
The main difference between a regular and accelerated debt consolidation are the types of debts takes into account. A regular debt consolidation program takes care of both your secured and unsecured debts.
Mortgages are included among the most frequent form of secured debts. If you are unable to keep up with your payments, your creditor has the legal right to take ownership of the secured asset. An unsecured type of debt, on the other hand, includes those loans or credit lines such as credit cards, pre-approved unsecured loans and hire purchase agreements.
For an accelerated debt consolidation program, the consolidation firm segregates your secured and unsecured debts.
An accelerated debt consolidation program focuses on your unsecured debts. This is because most unsecured debts have a higher percentage on interest rates, but are smaller in amount than a secured debt. If you decide on an accelerated program, you may find that the process involved is faster than a regular consolidation program.
So, what shall you go for?
If most of your debts are unsecured, and you would like a faster process, then you will find that an accelerated debt consolidation program would suit you better.
If you have a mixture of debts (secured and unsecured) to deal with, you will probably find that a regular consolidation program will work out better for you in the long run.
Whichever type of debt consolidation loan you choose, make sure that you have discussed it in depth with a financial advisor first and that you are comfortable with the terms laid out for you.
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