Chances are, if you're reading this article, that you have some serious debt accumulating. It can be extremely daunting when the bills keep piling up, and you may not know where to turn to for help. You may have heard a bit about debt consolidation but aren't too sure on how it will help you climb your way out of the hole you're in.

Read below to learn about different ways you can use debt consolidation in Colorado.

Colorado Debt Consolidation Loans

One of the more common types of debt consolidation is a consolidation loan, which enables you to merge all your debts under one single payment. You will find a couple of different types of debt consolidation loans you can use.

Secured Debt Consolidation Loans in Colorado

Typically a secured debt consolidation loan will allow you to lump most of your debt payments under a single bill at a lower rate than the individual rates you've probably been getting. However, in order to secure a lower rate with a secured debt consolidation loan, you must have some type of asset to use as collateral, such as your home. Additional specifics on that can be found below.

How much of a loan you can get depends on the type of collateral you use and how much it's worth. These types of loans can be repaid back over a long length of time, anywhere from 5 to 30 years, and they can often boost your credit rating if managed properly. If not, you risk defaulting on the loan and losing the asset used as collateral.

Unsecured Debt Consolidation Loans in Colorado

Much like a secured debt consolidation loan, an unsecured debt consolidation loan lets you combine your debt payments under one lump sum with one interest rate. However, unlike a secured debt consolidation loan, you will not need an asset or collateral to receive such a loan.

Because you are not offering up any collateral for such a loan, it's a much riskier loan for debt consolidators, and your rate of interest could be somewhat high. These loans are determined according to your credit history and score, and the benefit of an unsecured debt consolidation loan is that you are not in jeopardy of losing your asset should you default.

Using a Home Equity Loan as Debt Consolidation in CO

A home equity loan permits you to borrow money, using your home as collateral. This home equity loan is essentially a second mortgage that lets you turn the equity on your home (the money your home is worth minus the amount you owe on it) into cash for you to use at your discretion, such as debt consolidation. These loans are set up to be repaid quicker than your mortgage in equal payments with a fixed rate of interest.

Home equity loans are secured loans that come with the same risks and rewards stated earlier.

Colorado Credit Card Debt Consolidation Options

There are also programs that enable you to consolidate all of your credit card debt into one single payment (and interest rate). If you have good credit, you could also be able to negotiate a reduced interest rate on your credit cards, making it easier to pay off.

Another option is to qualify for a new credit card at a low introductory interest rate (possibly as low as 0%) and transfer your credit card balance to your new card. When you are in your interest free rate, you can make double payments so as to pay off your debt faster. But remember that the interest will probably be fairly high after the promotional period. You should consider this way of consolidating debt only if you know you can pay off the debt while the introductory rate is in effect.

Enrolling in a Debt Management Program in Colorado

Another option when it comes to debt consolidation is to enroll in a debt management program. A credit counseling agency can help you set up a debt management plan to enable you to pay off your debt in a timely fashion. This agency will also usually negotiate with your debtors in order to reduce interest  rates and fees.

Once the repayments have been negotiated you will usually create an account with the credit counseling agency and pay one lump sum a month into the account. The credit counseling agency will then disburse the payments out to each individual creditor. This benefits you because you just need to make one payment, and additionally it gives creditors more assurance that your payments will be made on time each month.

Credit counseling agencies can also help you build a budget that's simple for you to follow and help alleviate some of the stress your debt has been causing you. If you stick to the plan a debt management program can help you save money, pay back debt sooner and have a positive impact on your credit score.

 

Debt consolidation doesn't have to be scary, and there are many options that can help you get out of debt faster. Research all your options and then pick the one that works for you and your financial situation.

Benefits of Debt Consolidation