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How Can Debt Consolidation Can Help?

Jan 24, 2008
Surely you've heard of debt consolidation from watching TV or sifting through the junk from your mailbox. Maybe you've also discovered that your income doesn't go as far with rising gas prices, energy costs and cost of groceries increasing. On top of that, your debts may be requiring a big chunk of your checkbook, as well. Perhaps you've started looking around for help with reducing your debts even though you are using credit cards to try and make ends meet each month. This could be a good time to consider consolidating your debt.

Debt consolidation is the process of arranging your bills and debts so you can save money by combining the bills into one loan or payment. Debt consolidation is primarily used to lower your monthly payments or to secure a lower interest rate. The ultimate goal of debt consolidation is to free up money in your budget or pay off debt completely.

If you're fortunate, you'll be able to qualify for an unsecured debt consolidation loan to use for combining your credit card and other unsecured debt. Although, for most people, a debt consolidation loan requires a secured loan for combining unsecured debts. Typically, the collateral used to a secure the loan is your house. For this reason, homeowners are regularly inundated with home equity loan offers.

On the bright side, a secured loan offers a much lower interest rate than an unsecured debt consolidation loan because the lender assumes less risk. You'll probably find the reduced interest rate to be the best way to consolidate your debts and hold onto more of your income each month.

Another type of debt that may become difficult to manage over the years is student loans, either your own or ones which are used to pay for your child's college expenses. Student loans may also be consolidated, however, the process involved is different than what's used for consolidating other unsecured debt.

In most cases, you can only consolidate student loans once with a private lender in order to receive a lower interest rate. You may be able to refinance again through the Department of Education, after you've used the private refinance option. Refinancing isn't exactly the correct term to use with regard to student loans. Unlike standard refinancing, the remaining balances on the student loans are "locked in" at a lower fixed interest rate.

You may be able to benefit from debt consolidation for both student loans and unsecured debt by being able to lower the interest rates and reduce or pay off your debts. Consolidating several debts into one low monthly payment can free up your budget and make it easier to make ends meet, although, it may require you to put your home on the line as collateral.

Debt consolidation can give your financial situation a boost, with careful research and planning. Nonetheless, if you carry on with racking up debt, it won't help your economic condition recover in the long run. Your best options for dealing with your debts is to stay informed, periodically review your budget and, if you discover your earnings are stretch too tight, think about debt consolidation.
About the Author
Nothing else measures up to the relief you'll feel once you're able to elimate your debt ! Visit Debt Consolidation Strategies Revealed at http://debt-consolidation-strategies.com/ to find out how to get rid of your debt.
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