Debt Consolidation

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Debt Consolidation

What is debt consolidation?

Debt consolidation involves a process of combining multiple debts into a single larger debt. This way, you get to make one payment to one creditor instead of making multiple payments to multiple creditors.

Why Debt Consolidation?

Debt consolidation is a debt management and repayment strategy that exists to make managing your debts simpler. If you are stuck in a pile of debt, consolidation can simplify your finances by reducing the number of monthly payments you have to keep track of and lowering the cost of your debt through lower interest rates, which in turn might allow you to pay off debt faster. It can be used as a tool to deal with student loan debt, credit card debt, and other liabilities.

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The top questions people ask us

There are many different forms of relief for debt that go by the name debt consolidation and all of them have their particular quotes and their own pros. Most commonly, though, when someone says “debt consolidation,” they’re referring to a debt consolidation loan.

With a debt consolidation loan, you work with a lender to take out a personal loan that is large enough for you to pay off all of your various debts at once. Once you pay all of those debts off, then the only debt payment you have to worry about is paying off the loan. In other words, you’ve consolidated your debt.

Debt consolidation is an attractive way to manage and get out of debt for individuals who owe a lot of debt to multiple different creditors. That’s because, in general, it makes that debt much easier to manage. Instead of making multiple different payments with different interest rates and minimums to a bunch of different creditors, you just have to keep track of a single payment. That makes it easier to keep track of your debt and makes you much less likely to miss a payment and fall behind.

Though there are more forms of debt consolidation than just debt consolidation loans, they all share this quality: a single monthly payment instead of multiple payments each month.

Debt consolidation is a great way for a lot of people to get out of debt. But it’s not for everyone. How do you know if debt consolidation is right for you?

Debt consolidation makes sense if you owe a lot of debt to several different creditors. It should be enough debt that you struggle with keeping up with it but not so much that you’d never be able to get a personal loan in order to pay it off. Large forms of debt like student loans can sometimes be consolidated, but they usually need to be dealt with separately from other forms of debt.

Often, the kind of debt that’s well-suited for debt consolidation is credit card debt. It’s all too possible to open up multiple different credit cards and run them up without realizing what you’re doing. Your main credit card, your emergency credit card, the cards you have with different stores that you opened up for discounts – each one can get out of control if you’re not careful, and dealing with all of these different payments can be a nightmare. In this case, then debt consolidation might be right for you.

Even if you do owe money to multiple different creditors, debt consolidation might not be right for you. Here are some basic pros and cons to help to guide your decision.
  • Pros
  • Debt consolidation helps you to stand back and take a breath. By consolidating all of your payments into one, you’ll have a much easier time managing your finances and strategizing how you’ll get out of debt.

    Debt consolidation helps you to stand back and take a breath. By consolidating all of your payments into one, you’ll have a much easier time managing your finances and strategizing how you’ll get out of debt.

    Debt consolidation can also help you to see a light at the end of the tunnel when it comes to your debt. When you’re juggling a bunch of minimum payments, it can feel like you’re not making any progress towards becoming debt-free. With debt consolidation, as long as you keep up with your payments, you’ll have a clear path towards eliminating your debt.

  • Cons
  • Debt consolidation can also help you to see a light at the end of the tunnel when it comes to your debt. When you’re juggling a bunch of minimum payments, it can feel like you’re not making any progress towards becoming debt-free. With debt consolidation, as long as you keep up with your payments, you’ll have a clear path towards eliminating your debt.

    Debt consolidation is also a means to an end, not a solution by itself. All you’re doing is making your current debt easier to deal with. If you can’t get your financial house in order and stop using credit, you’ll just end up in the exact same position you are now: heavily indebted to multiple different creditors.

For more FAQs, please click here.

Note: These are general Debt Consolidation FAQs. We also suggest you read the FAQs for the Debt Solutions company we work with.