Consolidating organizations

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They also tend to have higher interest rates and lower qualifying amounts.Even so, the interest rates are still typically less than the rates on credit cards. “Typically, the loan has to be paid off in three to five years,” says Harrine Freeman, CEO and owner of H. Freeman Enterprises, a credit repair and credit-counseling service in Bethesda, Md., and author of “How to Get Out of Debt.” These types of loans don’t erase the debt; they simply transfer all your debts to a different lender or type of loan.Secured loans are backed by an asset of the borrower’s, such as a house or a car, that works as collateral for the loan.More traditional, unsecured debt consolidation loans, which are not backed by assets, can be more difficult to obtain.

There are two broad types of debt consolidation loans: secured and unsecured.

“If you can get your bank to approve a loan, that’s great," says Tim Gagnon, assistant academic specialist of accounting at the D'Amore Mc Kim School of Business at Northeastern University.

"But your bank may not be looking to keep you as a client and your credit scores may not be high enough to meet their lending requirements.” If you’re turned down by your bank or credit union, Gagnon suggests exploring private mortgage companies or lenders.

Once in place, a debt consolidation plan will stop the collection agencies from calling (assuming the loans they're calling about have been paid off). The Internal Revenue Service (IRS) does not allow you to deduct interest on any unsecured debt consolidation loans.

If your consolidation loan is secured with an asset, however, you may qualify for a tax deduction.

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