Consolidation Loans

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What - Definition
Consolidation Loans are a way to alleviate the debt burden of various borrowing through a new or existing loan.
1. Consumer Loans Consolidation
2. Student Borrowing
3. Business Loans Consolidation

Consumer consolidation loans deal with non business or education related debt that is personal. Consolidation loans are available to the consumer in different forms that include Debt Consolidation Loans, Personal Consolidation Loans, Home Consolidation Loans and more. The best personal choice available depends upon personal circumstances that include credit history, income status and existing debt load as measured by your debt-to-income ratios. In addition, homeownership (including equity situations) is also an important factor in loans consolidation.

loans consolidation

When looking for consolidation loans, the possession of non-home assets and investments adds further to your choices over potential loans. Consolidation of loans takes place when you combine two or more debt balances into a single account. Although consolidation of loans very often involves taking out a new line of credit, there are circumstances where an existing line may be used to absorb debt.

loans consolidation The best consolidation loans depend on your objective or debt concern. In many cases, the best consolidation loans are ones that reduce the monthly repayment cost down to the minimum possible. Often this may come at the price of a greatly extended repayment period. In other cases, the customer desires a more affordable payment but seeks to clear the debt in a set timeframe.


Consolidation Loans Features

Depending on the type of debt involved, one may refinance, consolidate or restructure existing borrowing. Consolidation loans will typically feature a lower interest rate spread over an extended repayment period compared with the debt to be consolidated.

  • Lower interest rate. The primary reason for loans consolidation
  • Reduced aggregate monthly repayments following loans consolidation
  • One or fewer accounts to have to manage.
  • Consolidation loans have a fixed APR in many cases
  • Home consolidation loans interest may be tax deductible
  • Installment loans may improve credit score
  • Can involve a significant increase in both the lending duration and total absolute cost.
  • Ability to have payments deducted directly
  • Consolidation loans may involve the conversion of previously unsecured debt into secured.


Consolidation Loans Types

Unsecured Consolidation Loans

Not always readily available, unsecured consolidation loans do not require collateral. Lending is based on creditworthiness and there is no lien involved. The advantage with these types of loans is that you do not risk losing an asset in the event that you default. The disadvantage with such loans is that they come with higher interest rates and potentially higher fees.

Secured Consolidation Loans

Secured consolidation loans on the other hand come with lower interest rates in general. This is because loans are secured against an asset that you own. This may be your house, vehicle, stocks or other forms of collateral. In the event that you default on the loan, the lender has a claim on your asset and may force liquidation of the asset to collect the outstanding monies.

Secured lending types afford low interest consolidation loans in many cases, however even where lending is secured, certain loans types (like Consolidation Debt Loans) may still be offered at higher interest rates compared to the low interest consolidation loans available to a homeowner with equity and good credit.

Consolidation Loans Concern

One common concern highlighted with loans consolidation is where consumers take unsecured debts and roll these into secured consolidation loans. The problem is not just that the loans consolidation now comes with an asset risk, but also that certain types of unsecured debt (like credit card debt) qualify for bankruptcy discharge. In the event that you later needed to file bankruptcy, you can lose that solution benefit. If you do make secured consolidation loans payments on time, and do not default, then of course there are no issues.

Consumer Consolidation Loans Alternatives

Personal Consolidation LoansThe following multiple sources of lending may perform the function of Consolidation Loans. All but the first (Consolidation Debt Loans) require a do it yourself approach, that is, you must arrange to pay chosen creditors off yourself using consolidation loans monies obtained.


Secured or Unsecured Consolidation Loans

1. Consolidation Debt Loans (Lending products known as a Debt Consolidation Loan).

Secured Consolidation Loans

2. Home Equity Loans
3. Home Equity Credit Line
4. Mortgage Refinance For Cash
5. Auto Refinance For Consolidation
6. CD/Savings Loans and Credit Line
7. Margin Loans (against financial instruments)
8. (Other) Collateral Loans (against appraised asset)

Unsecured Consolidation Loans

9. Card Balance Transfers (Card Consolidation Loans)
10. Signature or Personal Consolidation Loans
11. Personal Credit Line
12. 401K Loans
13. Life Policy Loans
14. Friends/Family Loans

Consolidation Loans Providers

Bank Consolidation Loans
A traditional source of lending, bank consolidation loans cover many of the above. You may frequently observe various products marketed as being a useful tool to help with debt consolidation. Capitalize on existing account relationships by talking with your local branch manager. Options may be limited for those with below average credit.

Peer To Peer Lender Consolidation Loans
Social lending networks.

Finance Company Consolidation Loans
A greater willingness to take on higher risk loans consolidation customers. Expect higher rates and fees.

Credit Union Consolidation Loans
Can offer small loans in addition to larger amounts. Like banks, many offer a 60-month loan maximum and often a $10,000 limit. There are however credit unions that offer maximum terms significantly greater (e.g. $20,000 over 6 years etc.) and as always one is advised to shop around. The advantage of credit unions is that their loans consolidation products typically offer lower interest rates than banks. May offer greater flexibility in repayment schedule.

Consolidation Loans Companies 
Lenders who concentrate on loans consolidation or exclusively service the debt industry. Consolidation Loans are available to all types of credit profile including bad. Lenders of this type range from genuine worthwhile companies through fraudulent operators. It is even more important to consider these companies and products carefully when looking for the best Consolidation Loans


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