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If this happens with multiple accounts, you can find yourself having to pay more money each month than you can afford to pay, even if you only send the minimum amount. One solution is debt consolidation, where you obtain a new loan in an amount that equals the total of all of your debts.
The simplest way to consolidate your debt is by applying for a secured loan. A secured loan is one where you provide collateral to the lender in exchange for the loan. Secured loans are ideal for consumers who have a poor credit history or who simply do not have a long track record of borrowing. Offering collateral gives the lender some amount of assurance that you will repay the loan.
Common types of security for secured loans are either homes or cars or trucks. Lenders prefer these items, as it is easier to establish a market value for them and they are easy to sell should it be necessary to do so. By offering collateral for financing, you should be able to receive a more favorable rate of interest than you would for an unsecured loan. Credit cards, for example, offer unsecured financing, and rates of interest for credit cards are commonly in the range of 20% per year.
The two factors that contribute to lower payments are a lowered rate of interest and a longer repayment period. A typical home equity loan, which would use your house as collateral, might have a term of repayment of fifteen years. The relatively long period of repayment, together with the lower interest rates that come with equity loans, should make your monthly payments more economical. Be aware that you are putting your property at risk with a secured loan. If you default, you will forfeit your collateral to your lender.
Applying for a collateral-backed loan for debt consolidation purposes can help you straighten out your money woes. You will still have to exercise some discipline, though, as the consolidation loan, like all loan, needs to be repaid. Neglecting to do so will put you right back where you started.