Friday, July 31, 2009

Manage your loans with loan consolidation…

The credit crunch has made you financially berserk. You have a steady income because your job “seemed” to be secured. With the credit crunch, your employment is at stake and you have to juggle your finances to meet your monthly financial obligations. The fear that you may be jobless has made you excessively cautious about your finances as you struggle to repay your existing loans. Loan consolidation can help you to get out of the financial mess. This is one of the options most debtors avail and are now enjoying a debt free life.

What is loan consolidation?
Loan consolidation is the process in which you consolidate all your loans into one so that you just have a single loan to deal with. This makes it easier for you to manage your loans and you can also keep track of the payments. It has been observed in several cases, that debtors have lost track of payments of individual debt accounts as they had multiple loans to deal with. This can be very troublesome and can eventually make your debts pile up.

What are your options in loan consolidation?
If you have decided to take out a consolidation loan, you can do it with the help of collateral that acts as security or you can avail the loan without using security. Your home usually acts as collateral.

What happens if you are using collateral?
If you are using collateral, it is referred to as secured consolidation loan, which in most cases is your home. Since you are using your home as security, the amount you have to shell out as interest rate is low.

There is one disadvantage of using collateral. Due to unforeseen events, if you are unable to make payments and you start defaulting, the creditor will not hesitate to take away or confiscate the property.

What happens if you don’t use collateral?
In case you decide that you will not use collateral, you will still get a consolidation loan. However, the interest rate the loan will attract will be very high as you are not using any security. So, to minimize the risk, creditors charge very high interest rates.

Benefits of loan consolidation
There are many benefits you can enjoy if you opt for loan consolidation. They are as follows –

• You have to deal with only one creditor
• Your debts become manageable
• Your credit score improves in due course
• You become debt free