Consolidation Debt Loan, secured and unsecured personal loans along with mortgages on homes are really the only types of loans. All the other names are just marketing names. Lenders use them to entice consumers to come to them and borrow money. For example car loans are secure loans for people buying cars. Personal loans are unsecured loans that can be used for just about anything as long as you can get approval. Payday loans are also unsecured high interest loans that unfortunately many people use. They pay a very high interest rate on these loans.!
Lower interest rates can be obtained by people with the best credit ratings and with something placed as security. For example cars and homes are used as security for mortgages and loans. Low credit ratings and no security carry the highest interest rates. That assumes you can find a lender willing to lend you the money! These typically are payday loan lenders and other unscrupulous lenders that charge very high rates of interest.
One payment is usually the main benefit of consolidating debt. If you happen to consolidate credit card debt into a low interest personal loan, then the monthly payment will also be lower. You will be paying a great deal less interest than you would to the credit cards. One payment a month is much easier to handle for many people. As well since it is less complex and less danger of missing a payment due to forgetfulness.
Refinance your mortgage. Use the proceeds to consolidate your debt on personal loans and credit cards. The result is usually much less interest payable. Also a lot lower monthly payment in total since your interest rate is lower. The amortization is a lot longer which gives a much lower monthly payment.
Longer amortization usually means two things. First the monthly payment is lower since you are taking a longer time to repay the loan or mortgage and the amount of principle that you repay on each payment is lower. Secondly the interest rate is usually lower on a mortgage, but the total amount of interest you pay will be a lot more in total simply because you are taking longer to repay the loan or mortgage.
Lower monthly payments are great especially when you have a lot of bills to pay each month. However it will take you longer to repay the loan and it will mean that you pay more interest in total. Any time you can repay a loan in total and get out from paying a loan or mortgage, you will be saving money which can be used for other things.
Better cash flow can be attained with lower monthly payments as well and sometimes this is really what is important. When you have a lot of other bills to pay each month, anytime you can improve your cash flow most people are probably better off. If you do have extra cash from time to time, throw it on the loan and reduce your principle so that you pay less interest and you repay your loan more quickly.
Close credit card accounts to improve credit ratings and to also reduce the chances of using them and getting yourself into a debt consolidation situation. Most people should only carry one credit card for daily use and one for backup purposes. Any others should really be closed.