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What is Debt Consolidation?
When you consolidate your debts, you are merging some or all or your debts into a single loan.
The new loan is (or should be at least) at a lower interest rate than the debts being consolidated, which
helps to either lower your monthly payments, or enables you to pay down more principle if you elect to pay the same each month.
Debt consolidation normally works best when dealing with unsecured debts; things like credit cards or student loans. Secured loans will more often than not carry the lowest interest, meaning the largest savings for the person(s) consolidating. That does not mean you wont be able to consolidate your debt because you don't have collateral, although the money you'll save might not be quite as much because the interest rate on your unsecured loan will be higher. How Do I Get Debt Consolidation?
While the process of consolidating doesn't have to be handled by a third party (asides from a new source for the loan), there are firms that do
offer comprehensive debt management services, and most people decide to enroll in such a service rather than take the task on alone.
While some "consolidation" companies will really lower your debts by decreasing what's owed to your creditors - this is actually debt negotiation or settlement, though they are often confused with one-another. If you've got various high interest bills, whether they are credit cards, medical bills or pretty much anywhere you've got a significant balance at more than 10% interest, debt consolidation is likely a good option for you provided you can qualify for a good rate. |
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