Debt can be a stressful hurdle to overcome. If you find that you are overwhelmed by credit cards or other loan debt, you may want to consider debt consolidation. By consolidating your debt, you may be able to lower your monthly payments. The following is a brief guide to debt consolidation:

Debt Consolidation Loans

With debt consolidation loans, borrowers are able to take out one loan and use the funds to pay off all of their other debt. Most people utilize debt consolidation loans to take advantage of lower interest rates, fixed interest rates, or for the convenience of making only one payment every month as opposed to several. Debt consolidation loans are often recommended for people who carry a large amount of credit card debt, because credit cards often carry the penalty of high interest. Debt consolidation loans typically have a lower interest rate and can provide a certain amount of relief.

Types of Debt Consolidation Loans

There are two basics types of debt consolidation loans: secured loans and unsecured loans. Secured loans are the most common. With these loans, the borrower must put up some form of collateral against the loan. Accepted forms of collateral often include homes, autos, boat, stocks, bonds, or personal property, such as jewelry or electronics. Unsecured loans, on the other hand, require no collateral. With these loans, the lender loans you money on good faith, relying only on your promise to repay. Here is a list of recommended Debt Consolidation Lenders online. It’s important to use a reputable lender online to make sure your personal information is secure.

Debt Consolidation Lenders

When looking for a debt consolidation loan, it is imperative to find the right lender. You must choose a lender who is willing to loan you the amount of money you need on the terms that work for you. Fortunately, the debt consolidation market is competitive. When shopping for a debt consolidation loan, make sure that you carefully compare lenders, interest rates, lending fees, and loan terms. Getting the best debt consolidation loan available is a very important step in rebuilding your credit.

Government debt consolidation loans are loans offered through various government programs to pay off multiple loans. This enables an individual to take care of one single monthly payment compared to 3 or 4 payments to different creditors. This is the principle of debt consolidation. Debt consolidation also helps by lowering the interest rate by switching from unsecured debt to secured debt.

The federal government has various programs that help particularly students in debt to consolidate their loans to quickly reduce and eliminate their debt. Students typically have student loans, credit card debt, and medical bills that keep them in a state of high debt. The Department of Education pays off the original federal education loans and issues a new loan for the consolidated amount of the old loans. This is done as part of the Direct Consolidation Loan Program.

The Federal Family Education Loan (FFEL) Programs and the Direct Loan Program are programs that fall under the Higher Education Act (HEA) and allow loan consolidation. This works by issuing a new consolidation loan to the borrower that pays off the borrower’s existing loans. The borrower might have contracted the existing loans from various lending agencies, which have different terms, repayment dates and arrangements. Paying off these multiple loans with one loan and making a single monthly payment helps individuals effect timely payments at a lower interest rate. With a consolidated loan, the monthly payment amount is generally lower. Moreover, there is increased clarity as to the total term of payback, the exact interest rate charged, and the payment due date. In most cases the payback term can be increased to ease the payoff process and reduce the monthly commitments.

The government debt consolidation loan program has four plans for the borrower – standard plan, extended payment plan, graduated payment plan, and income contingent repayment (ICR) plan. Each of these plans has features that suit the situation of a borrower, thus providing the flexibility required of a debt consolidation and elimination program.