What Does "Consolidation" Mean When You Are In Debt, And How Can It Help Me?

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9 Answers

Oscar De La Huerte Profile
Consolidating debt simply means taking out one big loan to settle the various individual debts you have. There are a number of ways you can consolidate a debt, and certain financial service companies specialize in offering these type of loans.
If you're considering consolidating your debt, I'd consider the following steps:

What does consolidating my debt mean? If you consolidate your debts, you are simply taking out one big loan to pay off all the outstanding amounts you owe to different people.
The main benefits of this type of action include:
  • One payment to keep track of (instead of several payments)
  • Reduced interest rate and late penalties
  • Faster debt relief
  • No collection calls
  • Improving your credit rating
Some companies that offer consolidation loans will also help you negotiate the best deal with all the people you owe money to.
Just bear in mind that consolidation loans usually require some sort of collateral (such as a house or car). If you don't get a good deal with a consolidation loan, then you will simply struggle to pay that off too.
The most effective solution is to do some serious market research. Don't settle for one quote, get as many as you can. Visit as many companies as you can, and compare the interest rates and collateral required.

Consolidating your debt Taking out another loan might seem like the least rational thing to do when you're already neck high in debt, but consolidating can be a really good idea.
Unless you get a high interest rate then it could be a really bad move, depending on the conditions of the loan agreement.
The best thing to do is to shop around, get as much information as you can, and make your decision accordingly.

There are many non-profit organizations that can provide financial advice for people struggling with debt, don't be afraid to get in touch with them!
Anonymous Profile
Anonymous answered
Please be very careful when evaluating debt consolidation options. For some people, this cure is worse than their original problem (higher rates, higher monthly payments, adjustable rates, etc.). Talk with a non-profit debt counselor about your options.
thanked the writer.
David MrBucky
David MrBucky commented
Debt consolidation can be worse than bankruptcy. So be very careful.
Anonymous
Anonymous commented
Consolidation help to repay your debt with single payment..It is help full when you already two more then loan from different loan lenders..In UK a online lender provide same service at low interest rate.Lender name -Cash Saga Finance
peter flaherty Profile
peter flaherty answered
Generally it helps. as long as it is a reputable company that oversees the consolidation. What happens is that all your debts are listed. All your income and home finances are listed. The credit card companies, and others whom you owe are asked to forget the interest and take an amount that will satisfy just the balance of the debt. All the payments are totaled up and you are presented with a list of people whom you owe and what they will accept. This is a monthly payment. The payment amount is forwarded each month to the consolidator, who will pay the people, and send you a bill with the amount deducted from each creditor every month. This is good because it stops the phone calls for collection, better than bankruptcy, starts to repair your credit, because you are paying what you can (many times more reasonable than the finance charges tacked on). Whenever the creditors are paid they are removed from the list, and your payment decreases, until you are debt free.
Anonymous Profile
Anonymous answered
Debt consolidation essentially refers to taking out one loan in order to pay off all the others you may have incurred, as well as obtaining a low, or fixed interest rate. It traditionally involves opening a secured loan against collateral, such as a house or a car, with the collateral as an element of risk whose value can be paid back to the lender if necessary. The debt is then consolidated into one loan that can be paid off gradually and consistently rather than at different stages. It is commonly used as a way of paying off credit card debt and student loans. The resulting payments on the loan are often lower per month as a result of acquiring a fixed interest rate. As well as major banks and building societies, several organizations exist to act as advisors and brokers for these deals.
Anonymous Profile
Anonymous answered
Debt consolidation is a process that will help you to consolidate multiple loans into single new loan or debt consolidation program - it is generally termed a debt consolidation loan, but there are also many debt payment program  that do not involve a new loan. It is important for you to know what would be your best options to pay before selecting a debt consolidation program or company.

If you have a lot of debts that you are required to pay back your debt, then debt consolidation could be the best choice. It has many additional advantages like

You can pay back the debt in low and fixed interest rates You will have to pay to only one lender It marges all the debts into one debt.They can have it from different sources like banks, loan companies etc.
Chips Ters Profile
Chips Ters answered

New Start Financial is a mortgage brokerage firm that specializes in hard-to-place mortgages such as self-employed mortgages, home loans. I used New Start Financial for my first home purchase.

Anonymous Profile
Anonymous answered
Debt consolidation is helpful because it can lower your monthly payment. So if you having trouble making that payment every month, you can get multiple loans consolidated into a lower interest rate or just get a lower interest rate and extend the payments. You might need collateral (like your house) to get a good rate, so you need to decide if that I something you want to risk.

Also make sure you speak with multiple companies and go very carefully over the terms of the loan before you sign anything
Mike Davis Profile
Mike Davis answered
Yes, a lowered interest rate and penalties will surely bring relief. But it really feels good when you don't need to handle those harassing collection calls anymore.

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