What is the Best Way of Debt Consolidation?

When secured personal loan was first introduced by banks, the market was not promising because many prospective clients lack assets to qualify as collateral. This limits revenue generation not only of banking institutions but of the government as well.

To provide a more practical option to borrowers, unsecured personal loan was introduced to those who do not have properties on their name but have the capacity to pay premiums and meet interest accrual.

The easier application process with fewer requirements makes an unsecured personal loan more suitable to borrowers with multiple credit obligations that require separate payments; thus, it’s less time consuming. Debt consolidation is paying out all the existing credit obligations with other lending institutions, thereby, consolidating all debts into one and saving more time and money in the process. By doing so, a borrower not only saves time in paying different dues from different lenders but also saves money by avoiding payment of multiple interest rates.

Loan consolidation is a valid reason accepted by many banks and lending companies in unsecured personal loan applications. For banks, this means that the applicant means serious business when it comes to meeting obligations. The practicality of paying a single debt is more financially manageable than having to do separate budgeting and computation for multiple credit accounts. As banks, the last thing they want is to have their clients lose money as it also lowers the possibility of settling dues religiously.

Some banks offer assistance in closing prior debts for a minimum fee. Depending on the contract agreed upon by both parties, smaller monthly dues or an extension of terms may be negotiated.

Nonetheless, it is important to consider the interest rates in choosing a loan plan. Of course, there is a chance that the interest rate for the new loan may be higher when compared to the closed ones, that’s why choosing the right bank to trust is crucial to a successful debt management.

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James Henry Abrina is an editor, writer, SEO specialist and currently a Corporate Communication Professional, Market Desk Strategist, Business Development Officer and Unit Head for Business Profiles Incorporated.

He currently specializes in security management and business intelligence. Together with the company, he advocates Business Continuity Planning to change how the Philippine business sector sees the definition of crisis response and management.

For more useful information, read his articles at Triond and Masscom Tutor. Or his EzineArticles page.