These days there are a myriad of financial products available to consumers, from credit and store cards through to personal loans and mortgages. The contracts supporting these products can often be complex and difficult to understand and people often sign up to new credit accounts without fully understanding the impact they are going to have on their future finances. Although lenders do offer help and support to customers they also make it as easy as possible to apply for new credit accounts, either via telephone, in store or over the Internet and what may seem like a good deal in the beginning can end up becoming a financial burden that can send your spiraling into debt when you can no longer afford to meet the high repayment demands.

If you have fallen into bad debt and have a number of credit accounts that you are finding difficult to manage then one solution can be a debt consolidated loan, which offers consumers a way to combine all of their debts into one single loan amount, which is much more straightforward and simple to manage. With a debt consolidated loan you will only have to deal with one lender at a time and one set of repayment rules and this is much easier than trying to understand and organize a variety of very different financial products from loan purchase agreements through to variable rate credit cards. You will also only be responsible for one single monthly payment, which makes it much easier for you to plan your monthly incomings and outgoings to ensure you never miss a repayment again.

Types of debt consolidated loan

There are two main types of consolidated loans, and you will need to look into these carefully to understand the financial implications of taking out each type of loan, and how it will impact your future:

• Secured Consolidated Loans – secured loans are those which require the customer to offer a personal asset as insurance against the amount borrowed. The loan will then be literally secured against this asset, so if the borrower falls behind on the repayments then the lender can legally claim the assets agreed to cover the full cost of the loan. Assets typically secured against consolidated loans include your home or your car, so you must be very careful when taking out this type of consolidated loan that you do not fall behind with your repayments, as you could lose your asset, and if these are not valued high enough to cover the costs of the loan you could also still end up in debt as well.
• Unsecured Consolidated Loans – lenders are less willing to offer unsecured loans to customers with bad credit ratings as this loan will not be secured with any assets, so if the borrower falls behind on the payments or goes bankrupt the lender may find it difficult to recoup their losses.  Unsecured consolidated loans are more suitable for the borrower as if you do fall behind your home or other assets will not be at risk, but it can be more difficult to get these types of loans at a competitive rate if you have a poor credit history.

Choosing a lender

There are a number of different providers out there offering debt consolidated loans, from building societies and banks to specialized online lenders, and it is important that you take the time to research each lender and ensure that they are legitimate (especially important for online providers you may never have heard of before), and also that they have a good customer services record. You can check online at websites such as FTC.gov for lists of reputable consolidated loan providers. This is important because the last thing you want to do is commit yourself to a loan by an unscrupulous lender who will offer you more money than you can afford to repay, or who will treat you in an unprofessional manner by harassing you or ignoring your correspondence.

Choosing a consolidated loan

Once you have selected a number of reputable lenders you will need to compare the consolidated loan products they offer, and see which ones are suitable for you and can provide you with the best rates. As well as comparing the best rates and monthly repayments it is also a good idea to see what additional features each consolidated loan package can offer you. One such feature is Professional Debt Counseling, which is provided by some debt consolidated loan companies as a part of the service. This can be very helpful for those people who have fallen into a pattern of bad debt and who need additional support to help them forward to a debt free future.

Consolidated loans are not suitable for everyone, but they can benefit those struggling to manage multiple debts and because they can be offered over longer terms than other products such as personal loans, they can provide lower interest rates and lower monthly repayments. A consolidated loan is much more suitable for those borrowers on low incomes who can struggle to meet high interest rate product repayments schedules.