If the burden of repaying multiple loans is making your life miserable, there are ways to make things easier. Consolidating these multiple loans into one single loan repayment option can be a great way to organize things and make them fall in the right place. It also helps you in lowering your overall monthly expenditure while eliminating the stress and the confusing scenario of managing multiple debt repayment arrangements. It also helps in improving your overall cash flow.
The Concept of Consolidating Multiple Debts
First of all, you need to make a detailed list of the entire credit card balances and loans, followed by the interest rates as well as, the monthly payments for each of these. Now, you need to consider the consolidation options, as well. You can look for both the secured and the unsecured loan schemes available.
What is an Unsecured Loan?
An unsecured loan scheme allows you to utilize your good credit for consolidating multiple debts into one single loan amount. Now, this single loan amount needs to be repaid on an easy monthly installment scheme. The advantage lies in the fact that there is a chance of getting qualified for a loan, with a reduced interest rate than your existing scenario.
What is a Secured Loan?
A secured loan scheme allows the client to lend against the valuation of his/her savings account when it comes to debt consolidation from multiple loans to a single amount. In this scenario, the interest rate becomes lower than the existing debts. Also, the secured debt consolidation loan schemes come with lower interest rates when compared to the unsecured loans.
Which is Better: Secured or Unsecured Loan Scheme?
It may depend upon individual preferences, as to which option to pick, but the basic procedure for debt consolidation works in a similar way for each of the scenarios. Rather than doing multiple payments every month, you need to pay a specific amount for a certain period, to a single account. This concept is less worrying and promises an easy clearing of the debts. Your primary objective is to seek debt consolidation options that provide the lowest interest rate. If looked carefully, you can figure out options that may just work best for you to repay all your outstanding debts. The extra cash you have can be used for saving.
Debt consolidation basically revolves around the activity of fetching new credit for repayment of the existing debts, through easy monthly installment schemes. However, you must never confuse consolidation, with debt management options. Debt management is mainly concerned with the monetary settlement schemes to clear off the debts. Although both the options are used for settling debts or clearing them off, the principle and concepts differ much from one another. If you have a steady financial status, but are finding it difficult to maintain multiple debts, going for consolidation schemes would be the best option. On the other hand, if you are unsure of your financial stability soon, opting for settlement schemes through debt management programs may just suit the scenario.