What is debt consolidation?


Quite simply, debt consolidation is taking all or most of your outstanding debt and combining that into one payment. This can be done in a variety of ways including home equity loans, secured loans, and unsecured loans. Secured debt consolidation loans, secured by assets the borrower may own are typically the easiest form of loan to qualify for. Of course the lender will ask you to put up collateral for that loan in the form of property or anything of value that could cover the loan should you default.

Why would I want to consolidate my debts?


Consolidation can increase your disposable income by reducing your monthly repayments. It can also make your life a lot simpler. The more debts you have, the harder it is to keep track of them – and making payments late (or missing them altogether) can affect your credit rating and lead to charges, higher interest rates, or even legal problems.

How can debt consolidation lower my monthly payments?


First, you can arrange to pay back the debt over a longer period of time. Since you're paying it back more slowly, each monthly payment will be lower. However, since you'll owe money for longer, you'll be paying interest for longer, and that could mean you'll end up paying more in the long run. Second, many unsecured loans especially personal loans and credit cards come with high interest rates. If you can find a consolidation loan with a lower interest rate, this can also reduce your monthly payments, depending on how quickly you're paying off the consolidation loan.

What are the advantages of Debt Consolidation?


These loans can help you salvage your credit standing before it is too late.
With a bit of collateral these loans can be easy to qualify for.
You will likely be able to avoid bankruptcy
All payments are consolidated to one monthly EMI

What are the potential pitfalls Of Consolidating?


If you default on the loan, your pledged assets will go to the lender to pay your debt off. Typically the time frame to totally pay off your loan will be extended pretty substantially. You will likely end up paying more in interest by the time it is all over.