What is Debt Consolidation?
Debt consolidation is when a person combines many debts to a single one. Such debts are more often than not high-interest credit cards and other debts that are expensive to carry, so attaining a reduced interest rate is the main intention. This will reduce expense of carrying the debt, and further adds the convenience of not needing to deal with multiple bills and creditors each month.Consolidating traditionally will work best when consolidating unsecured debts, like credit cards and student loans.
These types of secured loans will more often than not carry the best interest rates, causing the greatest savings for the person consolidating. Thats not to say there aren’t programs around for folks who do not own a home or have any similar collateral to attain a consolidation loan, though the total savings might not be quite as significant since the rate on the consolidated loan will be slightly higher. While select debt consolidation firms will in fact decrease your debt burden by decreasing what’s owed to your creditors – this is actually debt settlement or negotiation, though they are often referred to as the same thing.
If you are now paying high-interest on a number of debts, whether they are medical bills, department store and credit cards or any additional un-secured debts; debt consolidation is likely a smart option for you. A lower interest rate wil either lower your monthly payment or allow you to pay the debt off faster. While debt consolidation doesn’t have to be handled by a third party, there are plenty of businesses that have comprehensive debt elimination programs, and normally families decide to utilize such a program rather than take it on by themselves.