Debt Consolidation

It's easy to get overwhelmed with easy to acquire consumer debt. Credit cards, available lines of credit, store financing, it can all add up little by little to a staggering monthly payment.

These payments can come in at all times of the month making it difficult to plan your budgets around effective debt repayments. Additionally, and more significantly, the amount of interest associated with these types of debt makes it a very expensive way to carry your owed credit.

If you are carrying significant consumer debt, you are likely paying a high proportion of your monthly payments against the accruing interest alone; and it can be very difficult to reduce the size of the debt with interest payments that can be as high as 20-30% annually. If you are in debt with high interest products, you should definitely consider debt refinancing. Look at the Citibank Personal Credit product to the right. You can transfer all that high interest debt to one payment at an interest rate of 6.9% until the debt is paid off. Tell me if that wont save you money?

Debt refinancing means transferring all of your disparate consumer debts under the umbrella of a single personal loan. This is a good option for four primary reasons.

Firstly, the personal loan amount should give you enough money to satisfy all the immediate demands of your creditors. This full payment against your debt will ensure that your credit rating does not become blemished through debt mismanagement. Further prompt and in full payments against the personal loan will further strengthen your credit rating, and this will make it easier for you to get the credit you really need in the future.

Secondly, the interest rates associated with a personal loan debt consolidation will be far less that what you are currently paying. A much larger percentage of your monthly payments will go to reducing the size of your debt. You will reduce your debt load faster through increased payments against the principal of the loan.

Thirdly, you can increase the duration of the loan. You can set the repayment plan to occur over a period of many years. This means that your monthly payments will go down substantially. You will be much more able to pay off your payments in time and in full with the reduced monthly payment.

Fourthly, it will be much easier to effectively budget your finances with just a single monthly debt repayment. Get a fixed rate loan, and you know exactly what your monthly payments will be for the entire duration of the repayment.

These four reasons make a debt consolidation very attractive. There are two main types of debt consolidation loans; the secured and unsecured loan. The secured loan will place an asset of significant collateral value against the balance of the loan. This type of loan will result in lower interest rates, as the bank views a secured loan as a much lower risk type of lending.

The second type of debt consolidation loan is an unsecured loan. This type of loan will be given primarily based on the strength of your credit score; and the interest rates associated with this type of loan will be higher than for a secured loan. Even if you have a bad credit history, you may be eligible for an unsecured loan through some of the niche market lending organisations that specialise in bad credit loans. If you are applying for an unsecured loan with bad credit, you will pay a higher rate of interest.