Consolidation loans may be obtained through a variety of different way including personal consolidation loans, home equity line of credit, home equity loans or transferring all your balances to a zero percent credit card. Although all these options may seem like just what you need, you need to evaluate exactly how consolidation loans work and which one is right for you and your family, if you have a family.

Although the terms "personal loan" is usually referring to a loan where there is no collateral, this is not always the case. Many people choose a home equity consolidation loan. If they already have a mortgage on their home, the bank will help refinance the loan and add the extra debts on to the balance of the mortgage loan. Instead of having a mortgage payment plus many small payments each month, they have one mortgage payment, usually much less than what the total of the mortgage and the other debts totaled prior to the new loan. If the borrower didn't have a mortgage, they can get a mortgage on their home, using the equity on their home to borrow the money they need to pay off their other debts. Many homeowners find a home equity consolidation loan very useful because the mortgage loan is for a longer term, allowing them to only make small monthly payments.

As much as many borrowers enjoy home equity consolidation loans, they are not recommended as the best way to get out of credit card debt. The reason for this that statistics show that most individuals or couples that use a home equity consolidation loan to get out of credit card debts often find themselves in the same kind of debt within a couple of years. Now, however, they have a larger mortgage payment plus additional credit card payments once again. The reason this happens to many people is the spending, specifically with credit cards, is not only a habit but a bad habit to break. If you have a lot of credit card debt and need a consolidation loan, you're probably not going to get the best possible interest rate, unless you've applied for the consolidation loan before your credit rating got affected negatively.

This is not to say that home equity consolidation loans should not be used because for many individuals, they can be a life saver. Consider, however, if you have problems making your mortgage payments in the future, you may be in risk of losing your home. If you find yourself in need of a home equity consolidation loan, you may want to reevaluate your spending habits.

There are other options available to you besides home equity consolidation loans. If you're not in debt for a large amount, personal consolidation loans may be your answer. Personal consolidation loans can be very convenient, helpful and, for some, an answer to possible years of miscellaneous debts adding up to large monthly payments. If you are considering getting a personal consolidation loan, make sure you shop around for the best deal. Most borrowers find the best deals can be found at credit unions so you may want to check with your local credit union. You'll also find many online lending institutions that offer personal consolidation loans, some requiring collateral and some without.

Personal Consolidation loans that are unsecured will not require you to put up any collateral for security while a secured loan will require collateral. If you're getting a secured personal consolidation loan, you may have other personal property other than your home to offer as collateral. Generally, a secured loan is going to have lower interest rates than an unsecured loan. Some personal possessions that are often used as collateral on personal consolidation loans are automobiles, motorcycles, boats, SUVs, ATVs, campers, etc. Most of these items, if they're in good condition, will have a high enough retail value to be used as collateral on personal consolidation loans.

Some banks will also allow savings accounts or CDs (certificate of deposits) to be used as collateral on your personal consolidation loans. The borrower can't take out the savings or the CD until the loan is paid. Your lender can help you to decide the best possible collateral depending on the amount of your personal consolidation loan.

As I stated, collateral is not always required to be approved for a personal consolidation loan. Obviously, the better your credit rating, the better your chance of getting a personal consolidation loan and the lower interest rate you'll be paying. However, even individuals with poor credit rating can get personal consolidation loans. The reason for this is simple. Many people have poor credit rating because they have many monthly payments and their many monthly payments total an amount that is more than they can afford to pay. Banks and lenders realize this and are usually willing to help. By getting personal consolidation loans, they're helping you to pay off your debts and have less monthly payments. Here's an example of how personal consolidation loans can help.

Debt Balance Monthly Payment

Dept Store Credit Card $ 500 $ 30

Gas Credit Card $ 700 $ 40

Kohl's Credit Card $ 400 $ 25

Penney's Credit Card $ 600 $ 30

Mastercard $2,000 $ 100

Visa $3,000 $ 125

TOTAL $7,200 $350

Getting a personal consolidation loan for $7,200 to pay off these debts may help the borrower eliminate $350 in monthly payments in exchange for a $150 per month loan payment (or similar amount). The debts are paid off, giving the borrower more extra cash while building the credit rating.

If you decide that personal consolidation loans are the answer for your debt problems, shop around for the best deal on terms, interest rates and fees. There are many places to check online and in your area. Soon, you could be almost debt free with the help of a personal consolidation loan.