Debt consolidation as an option

Debt Consolidation Basics

If you are struggling to make the payments on your credit cards or personal loans, are behind on your bills, or are being harassed by debt collectors, then debt consolidation may be for you. This is also the case if you have already defaulted on some of your personal loans, have a bad credit rating, or are being threatened with a lawsuit. Even if you are plagued by having too many bills and loans to track, consolidating your debts can help bring order to your finances.

Debt consolidation typically involves the consolidation of all your credit card debts and unsecured personal loans into a single loan. This has the advantage of simplifying bill payment, letting you pay one monthly payment instead of many payments. It may also lower your monthly repayment amount, letting you repay your debts over a longer period of time. Another benefit may be the lowering of your interest rate, allowing you to save more money.

Creditors are likely to start contacting you if you fall into debt and are unable to pay your monthly minimums. Having many bills to pay can also result in you forgetting to pay one bill statement or another, also leading to a call from a creditor. Managing your finances becomes much easier when you opt for debt consolidation because you deal with only one lender. Also, because you are paying all your bills on time, your credit rating is protected from a missed payment.

A credit consultant will work with you to consolidate all your debts into one low monthly payment. The repayment period is typically set at three years but can vary depending on your circumstances. The credit consultant also negotiates with your creditors to lower your interest rate and waive any late payment fees. In order to secure such a beneficial arrangement, however, you must make timely payments on your consolidated debts for at least three months.

All unsecured debts and loans can be consolidated through debt consolidation. This includes personal loans, store credit cards, utility bills, credit cards and medical bills. In contrast, secured debts, such as your home mortgage or your car loan, are secured by actual collateral and are not eligible for this option.

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