Consolidate Debt Online: Consolidating Debt to Improve Affordability

If you choose to consolidate debt online, you can dramatically simplify your personal finances and save money on debt interest payments. Despite the fact the cost of a bank loan has risen in recent years, credit card debt remains one of the most expensive ways of borrowing money. Putting all your different debts under one roof is the preferred option if you have fair, good or excellent credit. This isn't the case if you've defaulted on your credit agreements in the last 7 years. If you already have a bad credit history, a debt relief solution may provide a better alternative because you can often freeze further interest and charges.

Consolidate Debt Online with an Unsecured Debt Consolidation Loan

The Federal Reserve's G.19 report on consumer credit revealed that the average rate of interest on credit card debt was 14.48% in May 2010. Whereas peer-to-peer lender, Prosper.com, currently offers customers with an excellent credit rating unsecured personal loans from just 7.5%. It's one of the best ways to consolidate debt because you can combine all your debt without the provision of collateral, such as a house.

Does a Secured Loan Provide Online Debt Consolidation Assistance?

Debt consolidation online with an unsecured personal loan isn't the right option for everyone. If you have a history of bad credit, you're going to find that borrowing money without collateral is far too expensive. Worse still, most lenders will just reject your application. The consolidation of debt may only be an option if you're prepared to use the equity in your home to secure the debt. Do you really want to give your creditors greater powers to recover their money? Choosing to consolidate debt online by turning unsecured into secured debt may not be the right way to go as there are alternative ways to become free from debt.

A Debt Relief Program May Be the Best Way to Consolidate Debt Online

If you've got good credit, an unsecured debt consolidation loan provides an excellent way of putting all of your debts together. As we've already discussed, consolidating debt with bad credit involves putting up your home as collateral and should normally be avoided. A debt management plan or debt settlement program could help you to become free from debt without risking the family home.

A Debt Management Plan Offers an Alternative Way to Consolidate Debt Online

The objective of a debt management plan is to simplify your finances and pay off debt at an affordable rate. A professional intermediary negotiates with creditors to establish a reduced monthly payment. Rather than making a series of smaller debt repayments, you make a single payment to your representative and they deal with distributing the money. Although a purely voluntary arrangement, you're likely to find that most of your creditors will stop adding interest and charges to the outstanding balance. Following a recent ruling by the Federal Trade Commission (FTC), the management fee is taken from the monthly payment. The fee can no longer be taken up-front or added to the outstanding balance.

Consolidate Your Debt with a Debt Settlement Program

If you're looking for a way to reduce your debt without declaring bankruptcy, a debt settlement program could be the perfect solution. Your intermediary will liaise with creditors to achieve a reduction to the principal of up to 50%. Your part of the bargain is making a payment to clear the balance over the next 36 months. At the end of the term, the money will be disseminated to creditors and the remaining debt will be eliminated. It's a further alternative to consolidating debt online if your poor credit makes it difficult to borrow money

Sources

Woolsey, Ben. (August 24, 2010). Credit card statistics, industry facts, debt statistics. CreditCards.com.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.

Updated: 28 March 2011