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Why Should One Consider A Private Consolidation Loan?

A private consolidation loan combines an individual’s total obligation into one monthly payment. Often the debts that have been incurred will have a high interest rate and may be from several different origins such as credit cards, mortgages, medical bills, student loans, etc. A private consolidation loan is more manageable because it will have a lower interest rate and just one monthly payment. Also the interest rate for consolidation loans is a fixed rate.

Types of consolidation loans

There are two types of private consolidation loans - secured and unsecured. Most consolidation loans are secured by an asset, such as a house. Since the loan is secured, it's relatively easy for those with bad credit to get this type of loan. Caution must be used in getting this type of loan, defaulting on repayments could mean the debtor could lose the house.

Private consolidation loans also don't have prepayment penalties, so if the debtor gets a 30 year loan, it could be paid off in 20 years with no penalties and also avoid the extra expense of the interest that would have been paid.

The role of private debt consolidation companies

Debt consolidation companies serve as intermediaries between the debtor and the source of the bad credit. They negotiate on the debtors behalf to reduce the interest rates on the debts, thereby resulting in the consolidation loan having a lower interest rate.

Arguably, the number one cause of debt in this country is credit card debt. Typically, when a person has several credit cards, the payments are due at different times and since the balance is not being paid off, the interest rate is generally high. With a private consolidation loan, the term of the loan will be longer, but it will be much easier to manage since there is only one payment to be made.

Benefits of private debt consolidation

The major advantages to debt consolidation are lower interest rates and having only one payment to make. The disadvantage is that if the payments are defaulted, the collateral can be lost. So, although loan consolidation can be a boon for those in debt, it is not for everyone.

Often the debts that have been incurred will have a high interest rate and may be from several different origins such as credit cards, mortgages, medical bills, student loans, etc. A consolidation loan will be more manageable because it will have a lower interest rate and just one monthly payment. Also the interest rate for consolidation loans is a fixed rate.

Types of private consolidation loans

There are two types of consolidation loans - secured and unsecured. Most consolidation loans are secured by an asset, such as a house. Since the loan is secured, it's relatively easy for those with bad credit to get this type of loan. Obviously caution must be used in getting this type of loan since, if the payments are not made, the debtor could lose his or her house.

Consolidation loans also don't have prepayment penalties, so if the debtor gets a 30 year loan, it could be paid off in 20 years with no penalties and also avoid the extra expense of the interest that would have been paid.

Debt consolidation companies serve as intermediaries between the debtor and the source of the bad credit. They negotiate on the debtors behalf to reduce the interest rates on the debts, thereby resulting in the consolidation loan having a lower interest rate.

Managing credit card debt

Probably the number one cause of debt in the western world is credit card debt. Credit card balances are at an all time high. When an individual has several credit cards, the payments are due at different times and since the balance is not being paid off, the interest rate is generally high. With a private consolidation loan, the length of the loan will be for longer term, but it will be much easier to manage since there is only one payment to be made.

Student private consolidation loan

On completion of studies, a major headache remains – repayment of the debts incurred for higher education. As the loans may have been sourced from various lenders, making multiple payments at the same time will surely dent the pocket. The only viable solution available is to opt for a student private loan consolidation. By resorting to this option, it will be easier to pay off debts.

Consolidating all unpaid high interest debts in to a single loan will make it easier to clear the debts. All that is needed is to make a single monthly payment at reduced rates. It does not really matter who has provided the loans, whether government or private lenders. Student loans tend to accumulate quickly. But with this consolidation loan one can bundle up all the previous debts in to a single manageable amount.

This way only one lender needs to be dealt with, instead of multiple creditors.

Finding the consolidation loan is not that difficult. The loan market is full of lenders who are willing to help you in this regard. Before approving the loan, the lenders will check one’s financial strength and the extent of the debts that remains to be paid along with the interest rates. Subsequently, they will offer the consolidation loan at reliable rates, which result in considerable savings.

Making the right choice

By researching and comparing different private debt consolidation companies, one can determine the one that meets one’s specific financial situation, plus the cheaper interest rates the market is offering. However, it is advisable to choose a trusted and reputable debt counselor before making any decision. This will save time through specialized advise coming from a seasoned debt counselor and money by getting better results in a shorter span of time.