Debt consolidation means taking one loan to pay off others. In the recent times we have seen a number of people losing jobs or fearing the risk of losing jobs. Thus imposing financial constraints on ones day to day life is very important. Proper finance management is very crucial. Debt consolidation is considered one of the ways to mange burdens rather than letting all the loans scattered, with more than one and two or even more repayments to manage monthly.
It is common to have a car loan, housing loan, student loan, credit card loan etc all at a single time. Most people do most of their shoppings using credit card. It is really easier. But all that is easy and comfortable comes with a heavy price! Credit card loans have a huge interest rate that is sometimes even more than an unsecured loan.
Banking and financial institutions offer to help these heavily in debt individuals, by taking up their entire debt and merging them to one. Thus you are only liable to a single lender which is of a great psychological relief, than owing many. A debt consolidation management company usually hires a professional, who analyzes the debts and deals with the respective firms to waive off your interest and reduce your outstanding sum. Thus you
get a relief of due sum to be paid.
There are a few pre-requisites that are necessary to be eligible for debt consolidation
You have to have a steady income, and must submit proof for the same. Being an employee ensures that you can repay the consolidated loan.
Your credit score needs to be good. Someone who has not faulted their repayment wins better trust and a higher chance to be approved for a debt consolidation loan.
If you have a working spouse, the credit history of the spouse is also considered
Debt consolidation is especially useful when you have multiple loans causing stress and sleep less nights. Multiple loans mean multiple interests. A debt consolidation loan that you take can be secured or even an unsecured loan. A secured gives you the benefit of having to enjoy a lower interest rate. Though cases of non-secured loan is not very common, you can apply if you have a high income job, and you convince the debt management company that you can manage to pay off this unsecured loan.