Here are the basic workings of a debt consolidation loan... Firstly, the borrower (maybe you?) needs to have debts for which they would like to pay a lower interest rate and possibly stretch out over a longer term. These are the popular requirements. By doing either of these things (and especially by doing both) monthly payments on the new loan will be lower than on the old. Possibly the new payments will be sustantially lower.

But please remember to do your maths. It may be that though you have taken a payment of 100 per month down to 50 per month (or whatever), by adding ten years to the term of the loan, you have actually taken your total repayments from, say 5,000 to 6,500. The numbers will be different for every individual situation, obviously, but I'm sure you see my point.

Having applied for, and been offered a loan with this new lender, the client will then arrange to use the new loan to repay one or more of the old loans. These might be store cards, credit cards, car finance or whatever and so this can represent quite a monthly saving.

There is however a down side. For example, lets look at a car loan. You use your debt consolidation loan to repay car finance. Car finance is notoriously expensive and so this may be a notable monthly saving. The loan many people use is a remortgage (a loan secured on their home). Suddenly, your three or four year car loan is now going to be stretched out over another 19 (or whowever many) years. You will then still be paying for your car long after you have forgotten what colour it was!! This makes less financial sense. A lot less. But, people do it all the time. Tomorrow may never come...

Essentially, there are two types of debt consolidation loan: secured and unsecured.

Stuart Langridge is an International Financial Planning Consultant to expatriates who has a background in the UK mortgage market. He has helped hundreds of families with debt issues and now writes about it instead. You can find more of his work at: http://www.FreeFinancialGuide.net

Article Source: http://EzineArticles.com/?expert=Stuart_Langridge

• Most any large city has a number of small shops offering payday loans. They’re often found in strip centers; sometimes they double as pawn shops. They have a simple business – they lend you money until your next paycheck. The system is pretty convenient; you write them a postdated check for the amount you’re borrowing plus interest. On your next payday, they cash the check and your loan is paid off. What many people who use payday loan services fail to realize is that the interest rates charged by these firms are substantial, often reaching the equivalent of four hundred percent per year!
  
  
• To get a secured loan it can take time for loan approval, as the property will be inspected and appraised. Unsecured loans such as credit cards are usually faster to acquire, however the loan approval time may include a credit check. A credit check involves a lender getting a copy of your credit report to inspect your credit history.
  
  
• Credit card balance transfers
  
  
• All kind of loan – educational loans, auto loans, secured loans, unsecured loans, personal loans and any kind of loans – can be consolidated under debt consolidation mortgage. It is highly appropriate to adopt debt consolidation mortgage if you have numerous debts. However, a prudent step will be to understand debt consolidation if you actually want to apply for it. Debt consolidation mortgage has the capability to be turned in a way so as to allow maximum monetary benefits. Yet, one little error with debt consolidation mortgage and your situation will be back to square one.