All There Is To Know About Debt Consolidation


All There Is To Know About Debt Consolidation

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Most of us are struggling to get out of debt; everything from mortgages, credit card debt, loans. Everywhere there are BILLS, BILLS, BILLS. One way to get all those bills in check when they become so overwhelming is through debt consolidation. Debt Consolidation is the process of combining all of your unsecured debts into a single monthly payment. Debt consolidation might be done with a debt consolidation loan.  The loan is used to pay off your debts, then you pay off the new consolidation loan rather than dividing your payments to your creditors. You may be able to take out a debt consolidation on your own using a home equity loan or a debt consolidation loan from a bank.Debt consolidation is a financial strategy, merging multiple bills into a single debt that is paid off by a loan or through a management program.

Debt consolidation is especially effective on high-interest debt such as credit cards. It should reduce your monthly payment by lowering the interest rate on your bills, making it easier to pay off the debt.
This debt-relief option untangles the mess consumers face every month trying to keep up with multiple bills from multiple card companies and multiple deadlines. Instead, there is one payment to one source, once a month.
And it saves you money at the same time

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Common Methods

Consolidating with a home equity loan can be risky since your unsecured debt comes secured by your home. If you can't afford the payments, your home could be foreclosed. That wouldn't happen if your unpaid debts remained on separate credit cards.
If you hire a debt consolidation company, your loans may not necessarily be consolidated with a loan. Instead, your debts remain separate, but your payment is consolidated. You send one monthly payment to the debt consolidation company then that company divides your payment and sends it to all your creditors.

It Does Not Reduce Your Debt

After consolidating your debt, you may feel like your debt burden has lifted. However, it's important to remember that you still have the same amount of debt as before. Now, instead of having multiple accounts to pay, you have just one.
Pros and Cons
Debt consolidation is generally beneficial only when the final consolidated debt has a lower monthly payment or interest rate or both. While this makes it much easier to afford your monthly debt payment, it's often achieved by lengthening your repayment period. You'll ultimately end up paying on your debt longer than if you'd left your debt unconsolidated. The longer repayment period also means you'll also pay more interest on your debt.

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