Debt Consolidation Loans: The Secret Way to Be Debt Free

Secured LoansThere are different types of loans that one can apply for to create a debt consolidating account. If you own an asset of substantial value, you can apply for a secured loan to be your debt consolidation loan. Secured loans are backed up by collateral either offered by the applicant or requested by the loan company and since there is something of value that the applicant puts up, the risk for the lender is substantially reduced. With this type of agreement, the lender will be entitled to take a legal action of repossession of the asset guaranteeing the loan in case there is a violation of the contract by the applicant or problems with the latter’s payment terms. In turn, the interest rate is significantly lower and other requirements are considered with more leniency.Unsecured LoansIf, however, you do not own a home or a vehicle or are not comfortable using your assets as collateral, there are still options available for you to consolidate your debts.The other type of option is the unsecured loan. These types of loans are a bit harder to qualify for because there is no collateral or asset that the applicant guarantees as payment. Since the risk for the lender is much higher, the interest rate for these types of transactions is higher as well. You will need to prove that you have a good and long standing income and since the interest rate is almost exorbitantly high, most are better off applying for a secured loan.However, unsecured loans are still a much better option compared to using credit cards. Since credit cards are easily accessible, spending can easily get out of hand. Also, they have a higher interest rate compared to the previous two loans mentioned. If you cannot, however, acquire a consolidation loan, it would be wise to transfer all of your credit card balance to the one with the lowest interest rate and to cancel the rest.Credit Counselling AgenciesIf all else fails, there are agencies that are prepared to assist you with your debt consolidation. Credit counselling agencies are willing to negotiate with creditors and lenders (if possible) and reduce the interest rates that you pay for your debts and outstanding bills. Once this process is completed, you will have to make just one payment to the agency which will then take care of the rest. Be warned, though, that acquiring the services of an agency does not automatically clear you of all of your debts. They are not magicians and, more importantly, you must also commit yourself in not getting into any more debts and try to control your spending in order to keep yourself on the right track.As you can see, there are quite a number of options that one can have when trying to consolidate or eliminate debt. You just need to be vigilant and patient as this process may take a few years to accomplish especially if you have a considerable amount of outstanding debt. Once you get on the right track, though, and control your income-spending rate, debt will surely become a thing of the past.