Chances are, if you're reading this article, you've got 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. Maybe you've heard a bit about debt consolidation but aren't too sure on how it may help you climb your way out from the hole you're in.

Read below to learn about different ways you can utilize debt consolidation in Iowa.

Iowa Debt Consolidation Loans

One of the most common types of debt consolidation is a consolidation loan, which enables you to merge all your debts under one single payment. There's a couple of various kinds of debt consolidation loans you can use.

Secured Debt Consolidation Loans in Iowa

Typically a secured debt consolidation loan allows 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. More information on that can be found below.

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

Unsecured Debt Consolidation Loans in Iowa

Much like a secured debt consolidation loan, an unsecured debt consolidation loan allows you to combine your debt payments under one lump sum with one interest rate. However, unlike a secured debt consolidation loan, you're not required to have an asset or collateral to receive such a loan.

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

Using a Home Equity Loan as Debt Consolidation in IA

A home equity loan allows you to borrow money, using your home as collateral. This home equity loan is essentially a second mortgage that allows you to 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 interest rate.

Home equity loans are secured loans that come with the same risks and rewards mentioned above.

Iowa Credit Card Debt Consolidation Options

There are also programs that allow you to consolidate all of your credit card debt into one single payment (and interest rate). If you've got good credit, you might be able to negotiate a lower interest rate on your credit cards, making it easier to repay.

Another option is to get 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. While you're in your interest free rate, you should pay double payments so that you can pay off your debt faster. But understand that the interest will probably be fairly high after the introductory period. 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 Iowa

Another option with respect to debt consolidation is to sign up for a debt management program. A credit counseling agency will 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 an effort to reduce interest  rates and fees.

Once the repayments have been negotiated you will usually set up 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 repayments out to each creditor. This benefits you because you only have to make one payment, and additionally it gives creditors more assurance that your payments will be made on time month after month.

Credit counseling agencies can also help you build a budget that's easy for you to follow and help alleviate some of the stress your debt has been causing you. As long as you stick to the plan a debt management program can help you save money, get rid of debt sooner and have a positive effect on your credit score.

 

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

Benefits of Debt Consolidation