debt consolidation scam

Another interesting aspect is that it can reduce interest rates and therefore reducing the payments. By taking all the higher interest rates on your various loans and converting them all into one low interest payment you are saving your credit score from getting even worse. The higher the interest rate, when the payment is late, the worse your score will get.

Two Types

There are two different types of debt consolidation loans. The first kind is called a secured loan is easier to obtain, especially for people with bad credit. This type is the best kind to apply for. This kind of loan will most likely come with the lowest interest rate possible. A secured loan is secured by putting up the amount of the loan against something as collateral. A good example of collateral could be your mortgage or car.

The other type of debt consolidation loan is called an unsecured loan. This is of course the opposite of a secured loan, because there is no collateral. It is possible for someone with bad credit to get one of these, though not as easy as a secured one. This type of loan comes with a bit higher interest rate, though still lower than most.