Here are some answers to common questions I hear when I talk to people about consolidation loans.
-WHAT ARE CONSOLIDATION LOANS ?
Consolidation loans are basically what the name says – one or more loan that is taken out to consolidate many smaller loans.
Consolidation loans can be used in all cases where the debtor has more than one loan – but are most often used where at least some of the debt is credit card debts or other unsecured debts with high interest rates.
The advantages of consolidation loans are usually a combination of lower interest rates and a longer repayment period. This gives the borrower much lower monthly costs.
A downside of consolidation loans is that because the repayment period is usually increased, the total borrowing costs can increase. The reduced interest rate, however, often offsets this and gives a reduction in the total loan cost for the duration of the loan.
This article XXX explains all you need to know about consolidation loans.
-WHEN SHOULD I CONSOLIDATE MY DEBTS?
You can consider consolidating your debt in any circumstance where you have more than one loan. It is usually worth considering debt consolidation when parts of your debts are credit card related or high interest consumer credit loans.
-DO I NEED TO OFFER SECURITY FOR A CONSOLIDATION LOAN?
No, you can usually consolidate your debts even if you are not in a position to offer any security. But in order to achieve the lowest interest rates possible, you should consider offering any security you can (house, cars and other assets). Many financial institutions will even work with security offered by third parties – such as relatives.