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Debt consolidation is the process of merging multiple debts into a single debt and single monthly payment. Instead of making separate payments to multiple credit card issuers or lenders each month, you roll them into one payment, ideally at a lower interest rate.
Debt consolidation can help you lower your overall interest rate and save money. If you get a low interest rate loan for consolidation, you could save hundreds or even thousands of dollars in interest. Managing one payment can make it easier to stay on top of bills and avoid late payments, which can hurt your credit.
Have you ever thought about how to consolidate debt? Whether you’re trying to figure out how to consolidate debt or are using a debt consolidation loan to pay off your existing debts in full, it’s important to understand that debt consolidation is different from debt resolution. With debt consolidation, you will use the funds from your new debt consolidation loan to pay off all of your existing debts in full.
Once you’ve gotten the funds from your personal loan, home equity line of credit or other debt consolidation loan, you can start eliminating debt and live a life without worrying about it. You’ll pay off all of your existing debts and then have only one monthly loan payment, generally with a lower interest rate than your previous loans.
Consolidating debt can help you save money on interest and repay your debt faster, but it doesn’t fix the underlying reason you got into debt. Before consolidating, examine your spending habits and financial goals.
Debt consolidation and debt relief may work if you have already gone through a debt consolidation process, but it is not ideal. Debt consolidation works much better when you have fixed the underlying reason that you got into debt in the first place. Making sure those root causes are addressed will help make debt consolidation a successful experience for you.