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Consolidate Debt

Debt consolidation is most useful for people with a number of high-interest loans. These may include credit cards or other high-interest loans/bills; basically any debt with 15% or higher interest is a prime candidate for lower rates.

Debt Consolidation

Debt Consolidation Resources

A debt consolidation service can combine all these high-interest loans which facilitates a single convenient monthly payment that could be as low as half of the current payments.

Debt Consolidation

Debt consolidation is the process of combining all (or some) unsecured debt into a single loan, typically for the purpose of lowering overall interest rate and therefore total monthly payments. The consolidation effort itself is negotiated by the new loan provider, who can lower monthly payments by as much as 50% although 30-35% is the typical rate. Consolidation companies have better interest rates with most creditors than an average consumer, which is how they can largely reduce payments; by reducing and in some cases eliminating interest charges from accounts. They are in essence 'buying' the debt and paying it off at a better rate to the original creditors.

Debt consolidation programs are viewed positively by banks and creditors. Creditors realize that engaging in a debt consolidation loan is an attempt at repayment. With the growing number of bankruptcies, creditors also realize that a partial payment is better than none at all and are more willing to work with loan consolidation.

The process generally begins by filling in a very brief form with some information about the borrower, including a ballpark figure on the amount of debt and the amount that will be consolidated. This first step can be taken with more than one consolidation company. Most companies offer a no-obligation quote which provides multiple options.

How much you qualify for is largely dependant on earnings, total amount of debt, and total amount of debt to be consolidated. Different companies may make different offers, so the details of each such as repayment should be considered carefully.

An alternative that is commonly confused with debt consolidation is debt settlement or debt management. With debt settlement, a third party negotiates with creditors on the behalf of debtors to reduce the payments to creditors. It works similarly, but the company that arranges the debt settlement doesn't actually 'buy' the debt, they simply negotiate better payment terms and collect the money on the debtor’s behalf for prompt payment.

Some companies and organizations offer both services. Debt consolidation loans typically require collateral of sorts (a good option for homeowners), whereas debt management services can usually be acquired with little or no collateral. The options available to debtors to improve their credit and reduce debt are numerous provided that the debtor is serious about following the program.

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