If you know a little about debt consolidation, you probably already know that it means taking out one loan to pay off a number of debts. However, you may not know that there are a number of different types of debt consolidation:
Personal loans, such as you would get from your local bank or credit union, can be used as debt consolidation loans. A personal loan is an unsecured loan that has fixed payments over a fixed period of time. If you have bad credit or a low credit rating, you could have trouble getting approved for a personal loan or you may be approved but at a higher interest rate, however.
Low-Interest Rate Credit Card Balance Transfers
A low-interest rate credit card balance transfer involves transferring all your credit card balances onto one single credit card. Putting too much debt on one credit card could have a negative impact on your credit score, however. And be aware that low balance transfer interest rates are typically promotional rates that expire after a certain length of time. Make sure you know when the low rate will expire and what the interest rate will be after the low rate expires.
Home Equity Loans
A home equity loan is a loan that’s taken out using the equity in your home as collateral. While the interest rates are typically lower than other types of loans, you must have a fair amount of equity in your home and good credit to qualify for a home equity loan. A major drawback is that if the payments become unaffordable, you face foreclosure on your home. Because of that, it’s generally not a good idea to use a home equity loan as a debt consolidation loan.
Debt Consolidation Loans
Debt consolidation loans are offered by banks, credit unions, and private debt consolidation companies for the specific purpose of combining your debts. Debt consolidation loans vary, so it’s important that you choose wisely. Debt consolidation loans are beneficial because they generally have a lower interest rate than the current rates you’re paying on all of your debts.
Accredited Debt Relief can help you make the right decision when it comes to debt relief. We will sit down with you, examine your debts and finances, and help you decide on the best route for eliminating your debts – whether it is debt consolidation or something else.
For more information on how to consolidate your debt, or to schedule a free consultation, “like” Accredited Debt Relief on Facebook or follow Accredited Debt Relief on Twitter. You can also find Accredited Debt Relief on AFCC (the American Fair Credit Council site) or find Accredited Debt Relief on Yellow Pages.