Debt consolidation loans can be confusing, and not all borrowers are good candidates for consolidating their debt, as debt consolidation can leave a mark on your credit file. Debt consolidation is for those borrowers who have allowed their debt to get out of hand and cannot reasonably afford to repay their debt under the current terms and conditions of their various loans (or credit card agreements) and in particular for those who have been considering filing bankruptcy proceedings.
You can consolidate many types of debt, including credit card balances, personal loans, automobile loans, and private student loans. Your debt consolidation lender will look at all of the debt that you have accumulated to determine the amount that they are willing to extend to you in your debt consolidation loan. Debt consolidation loans cover the debt owed to all of your previous creditors (if you choose to include them in the consolidation) and pays them off completely, leaving you with the responsibility to repay your debt consolidation lender.
You Can Pay Less Each Month to Avoid Bankruptcy
Among the many advantages of consolidating your debts is that you will most likely receive a significantly reduced interest rate (especially as compared to credit card interest rates) than you are currently paying, which can save you thousands of dollars. Also, your monthly payment for your debt consolidation will be substantially less than the combined payments you were making before the consolidation, which will allow you to use your income to pay for things that you need with cash eliminating the need to incur additional debt.
You might want to consider credit counseling when you obtain your loan consolidation. Credit counseling is ideal for those borrowers who have found themselves in the types of financial situations that require debt consolidation and bankruptcy. Credit counselors can teach you how to be a better steward of your credit and how to make a budget to live by that will keep you on track with meeting expenses without relying on credit cards and loans.
To save additional dollars on your debt consolidation loan, consider going with an online lender. Online lenders not only have more money to loan borrowers of all credit backgrounds (which improves your chances of getting the consolidation loan you need), they also tend to offer lower interest rates that will make your consolidation loan payment easier to manage