Debt Consolidation or Accelerated Debt Consolidation?

Debt consolidation is a viable means of getting your debt paid off. However, there are two kinds of debt consolidation - regular debt consolidation and accelerated debt consolidation. Before seeking a debt consolidation loan, it is important to understand the differences between the two types.

Firstly, you need to realize that it is not necessarily easy to get a debt consolidation loan. This is especially true if you have ignored your debt for a long period of time, which in turn means that you probably have a credit report full of negative entries. As your credit history is consulted every time you apply for any kind of credit, this makes it very difficult to acquire a debt consolidation loan.

Regular debt consolidation loans are best obtained by those who see that trouble is coming, not those who are already knee deep in financial trouble. Accelerated debt consolidation on the other hand, is meant for people who already have a bad credit history and lower FICO scores. Accelerated debt consolidation works in much the same way as regular debt consolidation, but with one major difference.

Accelerated debt consolidation loans separate secured debts from unsecured debts. An unsecured debt is something for which you have not put up any collateral, such as credit cards, signature loans, or personal loans. Examples of secured debt include mortgages and automobile loans.

Usually, companies that offer accelerated debt consolidation loans will only include your unsecured debt when figuring out how much to loan you. They will not lend you money to pay off secured debts. Therefore, the type of debt consolidation that you seek will depend on the type of outstanding debts that you have.

If you have mostly unsecured debt, an accelerated debt consolidation program is for you. If you are behind on your bills to the point where it has affected your credit rating, an accelerated debt consolidation program should also be considered. On the other hand, if your debts have not yet affected your credit in a negative way, or if the majority of your debt is secured debt, a regular debt consolidation loan is the way to go.

However, beware of debt consolidation companies. In most cases, a debt consolidation company cannot do anything for you that you could not do for yourself. If you feel capable of it, you would be better served by taking out a home equity loan or even refinancing your home to pay off other debts in most cases. Some debt consolidation companies charge tremendously high fees and not all operate as ethical businesses. There have even been instances where they collect your monthly payments, but fail to pass the payments on to your creditors, which causes further damage to your credit and financial well-being.

Make sure that you explore all of the options. Before you make any agreements with any company, make sure that you thoroughly check the company out and that you fully understand what you are getting into first. You may also want to seek the advice of an attorney before you sign anything. If you call around, you can usually get an attorney to look over any agreement and advise you on it and just pay him or her for an hour of their time.