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Debt Consolidation Facts

Debt consolidation can work in many ways, but the most common form of debt consolidation employs methods¬†in which a third party manages the relationships you have with your creditors. does this by working with each creditor to settle total payment amounts, decrease total payment size, or freezing total interest applied - every person’s debt profile is different so everyone will need a custom plan to tackle their debts with creditors. No two debt consolidation programs are alike, so what we come up with for you may consist of any number of debt relief possibilities!

Unsecured Vs. Secured Debt

To understand how debt consolidation works, we first need to explain a little bit about the different types of debt. Debts fall into two categories: secured and unsecured. Each is explained in detail below.

  • Unsecured debt. Unsecured debt is a loan that is not secured by collateral. Common types of unsecured debt include personal loans, credit cards, and any other credit that isn’t secured against an asset.
  • Secured debt. This debt is secured against collateral or an asset, like your house, car, bank account, or boat. Mortgages and car loans are two examples of secured debts. With secured debts, if you fail to make your payments, your creditor has the right to seize the asset or collateral.

Because our services are directed more toward unsecured debts, you will get the most out of debt consolidation if the majority of your debt is unsecured. The reason behind this is unsecured debts are much easier to consolidate because creditors are more willing to negotiate when they have nothing to seize. In the same vein, consolidating student loans, tax debts, etc. are much more difficult because the creditors are less flexible - but we also offer programs for debts of this type. If you have secured loans you would like to add to your debt consolidation plan for the sake of convenience, you can certainly do that.

When Debt Consolidation Makes Sense

Now that we’ve reviewed the difference between secured and unsecured debt, you can get a better idea of how debt consolidation can help you. If your debts are primarily high-interest, unsecured loans, then debt consolidation can make a big difference in your payments and how soon you can pay off your debt. If any of the following situations apply to you, you should seriously consider debt consolidation:

  • You have many unsecured debts (such as credit cards)
  • You are having trouble making your monthly payments
  • You are in danger of declaring bankruptcy
  • Your creditors are hounding you for money
  • Your credit is suffering because your are overextended
  • You have high-interest loans
  • You want to pay off your debt faster
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