The days of instant gratification are here. If you want something, you never would want to wait for it. You would rather have it now than later. To support this new thinking and attitude, people have come up with all kinds of things like the microwave, instant coffee, instant noodles and even loans. Yes, I did not get that last by mistake.

In the past, people would spend years upon years saving their last dime and living well under their means in order save their money so that they could buy their first home.

However, gone are those days. Today if you want a new house, you do not have to save for it for years. Rather, you can get that house today and then spend years paying for that house. At least, you are fulfilling your dream.

Usually, a loan is basically a money transaction. The lender or creditor lends you some money for a specific purpose and then you have to pay back the money along with some interest in predetermined monthly instalments.

A bank, any private financial institution or even governmental organisation can be the lender. Any conventional loan will not have any backing from the federal government.

Now you can take a secured loan or an unsecured loan. The security here is for the lender and not for the borrower. In other words, a secured loan requires the borrower to put up some asset as security or collateral against which the lender issues the loan. Therefore, if the borrower fails to repay the loan in time then the lender can have their money back in the form of the collateral.

On the other hand, an unsecured loan offers no such security to the lender. This security is what decides the interest rates. As a result, the interest rates on a secured loan are much lower comparatively while the repayment periods are much longer.

Unsecured loans offer higher interest rates and shorter periods of repayment. The payment that you will have to make every month is also more. This is fair enough because of the risk involved for the lender.

The loan amount usually depends on the value of the asset that you put up as collateral in case of secured loan. On the other hand, for unsecured loans, the lender will ask for proof of income and consider your present financial situation to decide the loan amount.

Before you take any loan, you should carefully review their terms and conditions, rates of interest, any additional charges, insurance charges among other things. If in doubt, always clarify before signing anything.

Take a loan only if you have to. After all, debts are always stressful and there is no point in going in a debt when you can find some other way to deal with the problem.

In debt consolidation, you take a loan and use it to pay off your existing debts. Now, you will be left with a single payment to make every month. If you shop around and find a good loan then you can save on your interest payments and also get lower payments every month.

The main benefit that debt consolidation offers is immediate relief from your existing debts quickly. The reason that you need this is mainly the high rates of interest that these many small debts might have. Besides that, there is the hassle of keeping track of all your payments and if these payments have to be made on different dates then you are surely in trouble. Such a situation usually leads to missed or late payments. As a result, you incur more charges in the form of late fees. As against this, a debt consolidation loan allows you to start over afresh.

The simplest thing you can do is to take a large loan that will be able to cover your current debts. Now, you can have several options available to you for this.

Credit card transfers

This is a way to reduce your interest rates and hence your monthly payments. You can transfer your debts to a card that offers you a zero percent interest rate. However, you will have to be careful with this one. The reason is that most often this rate is only for a limited period and after that they charge the normal interest rate, which is generally too high. Hence, read carefully before going for any such transfer.

Home loans

This is perhaps the most secure and best ways for going ahead with debt consolidation strategy. You have to take a secured loan against your house, if you own one. These loans usually charge a lower rate of interest and give a larger loan amount. Hence, this is a good option. However, the only hitch is that if you fail to repay then you risk losing your house. There is one more drawback with these kind of loans. They stretch over a longer period. Thus, while you are making smaller payments every month, you might actually end up paying more than your current debts.

Retirement funds

This is always an open option. It seems almost as if you are borrowing from yourself. However, you should use this only if it is an emergency and you do not have any other option.