A Beginner's Guide to Low Interest Debt Consolidation Loans

What is Debt Consolidation?
Debt consolidation may be the answer for anyone drowning in a sea of unpaid bills. Debt consolidation lumps all of your unsecured debts including credit card bills, doctor, dentist, veterinary, and other service provider bills – any bills that are not secured by collateral or property such as an automobile or a house – into one monthly payment.

Debt consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest. If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer. Are you feeling overburdened with debt? Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a debt consolidation loan?

Secured on your home, low cost, low rate, cheap, low interest debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment – one calculated to be well within your means.

Types of Debt Consolidation:
There are several ways to achieve debt consolidation, including one that does not require borrowing more money. Debt consolidation options include:

1. Home Equity Loans – A popular method of debt consolidation, the home equity loan is a mortgage based on the amount of equity you have invested in your home. It should be noted that home equity loans are secured by your house, which means if you fail to make payments on schedule, and according to the terms of the loan, you risk losing your house.

2. Personal Loans – Many banks and other lenders offer unsecured personal loans based on your annual income. The amount that can be borrowed will vary from person to person, and not everyone will qualify for this type of loan. To use personal loan proceeds for debt consolidation simply deposit the loan money into your bank account and write checks to your creditors, or ask the lender to disburse the money to your creditors for you.

3. Private Loans – Some people may be able to borrow from family or friends and arrange very individual terms. Borrowing from others in your personal life can be tricky business and it is advisable to make sure any arrangements are made in writing.

4. Debt Management Plans – Not everyone will qualify for a personal loan, and not everyone owns a house, or has someone in their personal life from whom they can borrow money for debt consolidation. For people in this situation there is another option available - a debt management plan through a credit counseling agency. Even if you have all of the previously mentioned options available to you it may be more advisable to seek out a debt management plan. Debt consolidation through a debt management plan involves having a credit counselor negotiate with your creditors for payments you can afford. You end up making one monthly payment to the credit counseling agency which then sends money to your various creditors.

Regardless of which type of debt consolidation plan you choose, be sure to check out potential lenders or your credit counseling agencies thoroughly. It is also strongly advised that you destroy paid off credit cards and formally close those accounts to avoid the temptation to charge them up again. When done carefully and with consideration, debt consolidation will ease your financial worries. Looking for low interest debt consolidation loans can sometimes seem like looking for gold at the end of the rainbow, but loans with minimal interest can be had even by people with poor credit ratings.

The most important things in trying to find low interest debt consolidation loans are to know how to use your collateral correctly and to know the best places to shop. Don't be in a hurry to find a loan and miss out on a lower interest rate by simply taking the first offer that comes your way… shop around at different banks and lenders until you find the best loan for your money.

First you need to figure out the entire amount of debt that you want to consolidate, and also the lowest amount that you can get by on… while it would be nice to reduce all of your debt to a single monthly payment, you might have to pick and choose if your debt level is too high and your collateral value can't cover it.

Once you've determined about how much you're looking for, then it's time to head out and try to get one of the low interest debt consolidation loans.

Collateral matters:
In order to get the best of the low interest debt consolidation loans, you're going to need good collateral. The most common collateral is automobiles and real estate, and with good reason… these types of property almost always have high values and are easily recognizable as sellable property by lenders if things should have to come to that.

Use the collateral object that has the highest value, and try to borrow less than that amount. The lower the amount you ask for in relation to the value of your collateral, the better chance you have of getting one of the low interest debt consolidation loans that lenders offer.

Finding the right lender:
Different lenders can offer different kinds of low interest debt consolidation loans. Your best bet for finding a good rate comes from going to small local banks or finance companies… both of these are more likely to offer low interest debt consolidation loans that some of the larger chains of banks and lenders that get enough business that they don't need to offer you as low of an interest rate.

Try to go during a promotion that the bank or finance company is holding; they tend to offer special rates during promotions that you can take advantage of. If there aren't any promotions to be had, go anyway… even if they can't give you one of their low interest debt consolidation loans, they may be able to direct you to other lenders you should try.

Collateral and considerations:
Since applying for debt consolidation loans means that you have some amount of debts that you wish to consolidate, there's a good chance that your credit is less than perfect. If this is the case then you're probably going to need some form of collateral, or property that you put up against the loan that the lender will be able to sell to get their money back in case you don't pay the money back.

Collateral for debt consolidation loans can be a clear automobile title, the deed to a house or other real estate, or other forms of valuable property (though cars and houses are the most common forms of collateral.)

When applying for debt consolidation loans, you should first decide exactly how much money you need to borrow… usually, this will either be the total sum of your debts or the sum of the biggest debts that you have.

The amount that you need will help to determine what sort of collateral is appropriate for your loan, and will also be a major factor in determining the interest rate and monthly payment that you'll get in order to pay the loan back.

Limitations of debt consolidation:
Different lenders have different rules for debt consolidation loans… some have a minimum amount that you can borrow, and almost all have maximum amounts (which are usually based upon the value of your collateral.)

Many lenders that specialize in people with less-than-perfect credit will offer very flexible terms for debt consolidation loans, since that's where they get a lot of their business. Unfortunately, you often tend to have a slightly higher interest rate when dealing with these flexible terms.

In the end, debt consolidation loans can be a godsend to those who may have felt that there was no way out of their financial problems. The loans can get your debt under control so that you have a single payment to make, and might even help you avoid bankruptcy… a place that no one ever wants to go.

Consolidating Debt & Debt Reduction Without Owning A Home:
You have two options to consolidate and reduce your debt if you don't own a home. First, you can use the services of a debt consolidation agency. They will negotiate lower interest rates and smaller payments. The other option is to take out a personal loan and pay off your debt. The best option depends on your financial situation.

Debt Consolidation Agency:
Debt consolidation agencies, also called credit counseling, offer many credit services. Their primary job is to help you pay your debt and bills by negotiating lower rates and payments with creditors. If you have bad credit or on the verge of bankruptcy, this service might be your best choice.

You aren't charged any fees by these agencies since they are funded by financial companies. Financial companies don't want to see you declare bankruptcy and not pay them back, so they are willing to set up alternative payment plans.

Besides consolidating and reducing your debt, you can work with credit counselors to improve your credit. They can offer you advice on creating repayment plans, saving goals, and future financial strategies.

Personal Loans:
You can also decide to use a personal loan for debt consolidation and reduction. With interest rates typically lower than credit card rates, you can reduce your payments by hundreds. One payment also makes it easier to pay than several small bills.

With an unsecured personal loan, you will need to have decent credit and steady income. Once you pay off your other debts, you can decide to leave those accounts open for emergencies or close them.

Before you pay off all your bills with a personal loan, make sure you have researched several lenders to find the lowest rate. Also be sure that you find a rate lower than what you are currently paying on your bills. Personal loans are usually prime plus 2% to 5% higher.

Explore Your Options:
Before committing to either option for debt and bill consolidation, research your choices. Request quotes from lenders to see if you can find a good rate on a personal loan, but also talk with debt consolidation agencies to see what they can do for you. Choose the option that can lower your rates the most given your credit history.

A Beginner's Guide to Low Interest Debt Consolidation Loans

Credit card debt consolidation:
Some people carry debt on their credit cards due to inability to make payment owing to some emergency expenditure, others carry debt due to excessive or irresponsible expenditure on their credit cards (forgetting that they need to pay it back too). Today, a lot of people carry multiple credit cards and carry debt on each of the cards. Whatever be the reason, everyone wants to get out of this debt. Debt consolidation is probably the first and the best step in this direction.

Credit card debt consolidation is a pretty popular concept now. Put simply, debt consolidation is the process of transferring your debt from multiple credit cards to one credit card. It is also called transferring balance from multiple credit card accounts into a single account.

Why would one go for debt consolidation? Well, there can be multiple reasons. You could decide to go for it just to prevent confusion in dealing with multiple credit card accounts. However, the primary reason is lower APR on the credit account you are shifting your debt to. The APRs on different credit cards can be different. A lot of companies even try to lure new customers by offering a lower APR than their current credit companies when they transfer balance from their current card to the new card.

However, this is easier said than done. You need to read the fine print on such balance transfer offers, understand them completely and judge whether they would actually be beneficial to you. Among others, the following 2 set of questions are most important and need to be examined carefully before zeroing-in on a balance transfer offer:

Is there a fee associated with the balance transfer? If yes, then does it offset the benefit obtained in terms of reduced APR? Is the lower APR applicable only for a limited initial period? If yes, then how long is this period? What is the long term APR and is it less than the current APR on your credit card? Will you be able to pay all your debt during this reduced APR period? Is the card going to be beneficial to you in the long term? You might also want to explore other avenues of debt reduction before actually going for debt consolidation.

Contacting a good debt assistance company might be easier and better for you since these companies generally have all the information about balance transfer offers and other debt reduction/elimination methods. However, do not use services of such a company unless you are absolutely sure about the quality of their services. Declaring bankruptcy or a monthly-installment based personal loan are other possible means of eliminating debt. If you are not entirely sure about the best method, do not hesitate to take professional advice even if costs to a small fee. This fee might actually turn out less expensive in the long term as compared to the wrong option chosen by you all by yourself.