Over your head in debt? Consolidation may be the key... When debts are interrupting your sleep, you should consider debt consolidation, which will allow you to have only one loan in which to pay off all existing debts. The purpose of this action is to secure a fixed interest rate, lower interest rate, or just to service one loan, making it easier for payments through a secured debt consolidation backed by a collateral, or unsecured debt consolidation, which is not backed up with collateral. There are many ways to consolidate your debt, as an example, it can be done from a number of unsecured loans into another unsecured loan. Although debt consolidation usually entails a secured loan against any asset serving as collateral to obtain a lower interest rate, agreeing to allow the foreclosure of the asset in order to pay back the loan, which reduces the risk to the lender. Even if you are deeply in debt, a consolidation company can provide you with debt-reducing strategies to protect you from bankruptcy. Depending on the company and your particular financial situation, the company will draw some strategies ranging from reduction of the interest rate to lengthening your pay-off term, credit counseling and other solutions in debt settlement and budget management. Debt consolidation companies can also discount the amount of the loan buying it at a discount, passing along some of the savings, getting a monthly reduction of up to 40% of the original. However, consolidation can potentially affect your ability to discharge debts in bankruptcy when this danger is not saved. You may find that secured debt consolidation solutions are easier to find because they are applied by means of a home equity loan or a second mortgage on a fixed asset, so it is recommended that you use them only after weighing the benefits in comparison to the drawbacks. If you have high interest debt balances, take the advantage of refinancing to charge very high fees in the debt consolidation loan. Consolidation debt companies are experts in tactics of handling and negotiating. They can make your creditors agree to their refinancing terms, but you must be aware of predatory lending. This occurs when companies wait until clients have backed themselves into a corner and must refinance to consolidate and pay off those bills that they are behind on in payments. If clients do not refinance their debts, they may lose their collateral, so it is likely all of them will pay off any allowable fee to complete the debt consolidation, even when predatory lending tactics have been put on practice. Fortunately, most consolidation debt companies are not involved in predatory lending and they can be successful getting your interest rate reduced without nasty surprises. Shelling out a new lowered monthly pay, you can repay your debt in as little as a few months or up to 3 years, instead of the 10 years or more that it would take to pay the principal and interest, while debt consolidation makes it possible to pay only on the principal. Collateral is decisive in debt consolidation to get the higher amount of credit with more favorable interest rates. Once again, you should be careful before putting up your home or any other valued property as collateral, because of the predatory lending or simply due to the high interest rates and collections, leading you to extreme situations and even bankruptcy. Like in medicine, prevention is better than the cure. If you are in doubt about the consolidation debt company, do a little research before you apply. You can find some of them blacklisted at this site: http://www.creditinfocenter.com/debt/DebtConsolCompanies.shtml Although it is not easy, you can try to get an unsecured debt consolidation. There are several lenders and financial institutions that offer unsecured debt consolidation loans, which do not require collateral. However, these lenders are very cautious and these loans are not offered to everyone and carry a higher interest rate. In order to get an unsecured debt consolidation loan to consolidate your debts, you will need an excellent credit rating to be approved. Furthermore, some lenders may ask for other individual requirements if you only meet their minimum credit score criteria. It is even harder but not impossible to obtain this type of loan if your credit is poor or damaged. Whichever your choice, you can get control of your debts by repairing your credit rating, building up a great credit history or identifying some assets that you can use as collateral for debt consolidation. Additional Resouces: | 