What types of debt consolidation loans are available?

When people speak of debt consolidation, they should really be speaking of debt consolidations, as there are many types of consolidation available today to help you control your debts and get your financial life under control. In general, there are three basic types of loans available, although each of these may have several variations:

Secured debt consolidations:  These are loans in which something – usually your house – is used as collateral.  These types of debt consolidations are usually easier to get approval for and offer longer repayment terms and lower interest rates.  If, however, your debts are very high, you may have a hard time making the payments.  If you cannot make your monthly payments on these types of debt consolidation, your assets may be at risk.  In general, if you have medium to high debt levels and require low monthly payments in order to get your debts out of the way, these types of debt consolidations are ideal.  They are very good for homeowners who require a long time to get out of debt.

Unsecured debt consolidations:  If you do not own property but still have generally good credit, you can usually get these types of debt consolidations.  These loans are basically unsecured personal loans.  They offer shorter repayment terms and higher interest rates, making them better for smaller debt loads that you want repaid quickly.

Refinancing:  Some debt consolidations types ask you to contribute a specific amount of money each month to a service or company who them promises to give that money to your lenders.  In many cases, companies call and negotiate with the lenders to accept lower payments from you in exchange for the assurance that you are working with the company to repay your debts.  In many cases, you need to research carefully to make sure that the company offering the service is completely legitimate and is actually making the payments to your lenders as promised, especially since you remain completely responsible for your debts.  You also need to find a company with the lowest administration fees if you select this route.

Working with a Counselor to Consolidate Debt

If you seek help from a debt consolidation company, you will likely be given a counselor to work with.  This counselor will guide you through the process of paying off your debts and will help you to develop a personalized financial plan that can help you dig out from under your burden of loans.  If you decide to work with a Christian organization to consolidate debt, do make sure that you will be getting a counselor who:

•Makes you face up to your debts. A counselor should help you get over your fears of your debts and should clearly help you see how much you owe and who you owe money to.  This can help get you started on the road to consolidate debt.

•Gives you solid advice. A good counselor should help you by giving you specific ideas about how to consolidate debt.  A good counselor is someone who is knowledgeable and can offer you plenty of options.

•Actually helps you consolidate debt in your situation. A knowledgeable counselor should be able to offer you ways to consolidate debt that make sense for your budget and situation.  He or she should not simply try to sell you a “one size fits all” debt solution.

•Helps you avoid further debts. A counselor should clearly explain to you why you need to avoid more debts.  Better yet, a counselor will help you cut up credit cards.  Be wary of any counselor who suggests that you can consolidate debt and then go on spending as you have before.

•Makes things clear. A counselor should be able to show you (kindly) how you got into your debt predicament and should make it clear to you how you can get out and even avoid the same problem in the future.