Not all debt is evil. Debt is a tool that allows us to make major purchases like homes or vehicles on affordable terms. Responsible use of debt allows us to weather rough times while still putting food on the table and meeting basic needs. But sometimes, you need a bit of help organizing and paying it off. Let’s look into debt consolidations versus balance transfer cards.
Debt Consolidation Loans
The idea behind debt consolidation is simple. You owe different amounts of money to many different places under many different terms. The constant payments coming due are overwhelming – sometimes more than you even make in a month. Half the time you’re late because you can’t afford to pay for everything, and the other time you’re late because you simply can’t keep track of it all.
A debt consolidation loan is the most common solution to help you out of the swamp. It’s basically a personal loan with a specific purpose – debt consolidation – and traditional loan terms. A debt consolidation loan is generally unsecured and carries a fixed interest rate. “Unsecured” means you’re not offering up collateral as security for the loan. If you’re dealing with serious debt, it’s unlikely you have substantial collateral other than possibly your home, and we don’t want that on the line if god forbid something were to go seriously wrong and you couldn’t make your payments. “Fixed interest” means that whatever interest rate you agree to at the time of the loan remains the same over the life of the loan, making your monthly payments consistent and thus easy to budget for.