A very common type of debt is unsecured debt. Unsecured debt means that you do not have any assets, such as a house or a car, tied to the debt that can be taken if you default on the loan. In other words, the loan lacks collateral. The most common type of unsecured debt is credit card debt. People accumulate a large amount of credit card debt for various reasons, but most seek help to get out from under the mounting debt. Debt consolidation is appealing to a lot of people in this situation.
One way to consolidate unsecured debt is to get a debt consolidation loan. Often the institution giving the loan will have you tie it to something you already own, such as a house. This is not advisable because if you cannot make your payment, you could lose your house. If you desire to get an unsecured debt consolidation loan, the bank or other institution will often give you a high interest rate given the circumstances. This can be exacerbated by bad credit if you have had problems missing or making late payments in the past.
Another way to consolidate your unsecured debt is to seek the assistance of a reputable credit counselor. Depending on your circumstances, you may be eligible for a debt management plan. This type of plan is not actually a loan, but a way to organize your debt payments. You will pay one consolidated payment to the debt management company who will distribute the funds to your creditors. This has the same convenience of one monthly payment but allows you to also save on fees on those accounts. You will be able to watch your accounts diminish as you make your monthly payments.
The advantage is that your eligibility is based on financial need. You do not need a good credit score to qualify. You could get lower interest rates and a new lower payment through creditor concessions.
The debt management plan in most cases allows you to pay off your debts in five years or less. Combined with some budgeting advice, you will be able to get out of debt and maintain financial freedom.
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