A debt consolidation loan is a loan that is taken out to pay off existing debts. What this loan essentially does is take all the debt a persons owes and consolidate it into one single payment. There are many choices in debt consolidation loans. The type of debt consolidation loan a person chooses basically is determined by their situation.
If a person owns their home they can take out a loan on their home equity for debt consolidation purposes. This is probably the easiest option. The banks like that they get collateral for the loan and are likely to loan the money easily. However, the risk is that should the borrower not pay the loan their home is at risk for being seized and sold to pay the debt.
Another type of debt consolidation loan is an unsecured personal loan. This option is not going to be the easiest. A person should have fairly good credit to get this type of loan. Lenders will see this as a high risk loan and so the interest rates could be rather high.
If a borrower chooses this option they need to be very careful that the new interest rates do not make the payment too high. They do not want to end up paying more per month then they would to...
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