Saturday, January 4, 2014

Why You should consolidate your debt - Guest Blog written for financial site!


Debt Consolidation

Liabilities can increase and become unmanageable over the life of ones financial history. In the event that an excessive amount of debt is created, a debt consolidation loan is a notable alternative. This financial agreement serves the purpose of revitalizing a financial portfolio, and allowing postponement from bankruptcy. There are a myriad of rewards and consequences associated with a debt consolidation.
Overview
A debt consolidation loan is large loan, which is incepted to combine smaller debts into a large one with a single interest rate. This can be done with a fixed interest rate or a floating interest rate. Typically a collateral investment is used as a lenders security in case the borrower defaults. A house is the generally used collateral, which the borrower allows a state of foreclosure if the debt consolidation agreement is not fulfilled. This will force the sale of the collateral to repay the debt, at the expense of the borrower. A mortgage is taken out on the house or property to document the agreement.
Importance of Debt Consolidation
Having multiple interest rates can delay the speed of repayment for individual’s debts. A poor financial portfolio mismanaged by anyone can suffer perilous consequences. By combining multiple debts into a locked singular interest rate, a singular end point is created for satisfying multiple loans. Lower interest rates are available with the securing of collateral, which is an advantage to a borrower. Doing so will immediately reflect on a credit report.
Common debts associated are car loans, student loans or unpaid medical bills. These all negatively affect a credit rating and can create a negative impact on ones life. Risk of default can be wiped away with a singular consolidation loan to extinguish outstanding debts from occurring high interest rates or late fees.
            Credit cards for example are an example of unsecured debt. They generally carry a high interest rate for repayment but fortunately can be included in a debt consolidation loan. This will reduce the amount of time expected to repay the debt and decrease the interest, which is a huge advantage to the borrower.
Bankruptcy
If a debtor is in risk of declaring a bankruptcy, then a debt consolidator can buy the consolidated loan on discount. It is prudent if this occurs to search for options in a lender. Ones that increase savings and lower interest rates while decreasing the repayment time are highly recommended.
Choosing A Lender
 Multiple companies exist to consolidate consumer debt. Choosing an accredited company will ensure that a reputable firm is handling the transaction. Credit history and accurate appraisals will offer the best rates, however each company will have different cost associated. Any closing fees, early termination fees or non-guarantees should be examined. Seek the advice of the better business bureau and check if the company offers debt counseling as a service.
Taking the necessary steps to research debt consolidation will ensure adequate management of outstanding debts. With the help of debt consolidation a lenders allow borrowers to retake control of their financial fate.


   

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