Debt Consolidation

If you need help getting out of debt, you are not alone. Although signs show an upturn in the economy, many Americans are deep in debt and not everyone can work overtime or a second job to pay down that debt. That's where debt consolidation and other financial options come in.

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What is Debt Consolidation?

What is Debt Consolidation?

Debt consolidation is combining several unsecured debts - credit cards, medical bills, personal loans, payday loans, etc. - into one bill and paying all of them with a single loan. Instead of having to write checks to 5-10 creditors every month, you consolidate bills into one payment, and write one check. This helps eliminate mistakes that result in penalties like incorrect amount or late payments.

There are three major types of debt consolidation: Debt Management Plans, Debt Consolidation Loans and Debt Settlement. These are not quick fixes, but rather long-term financial strategies to help you get out of debt.

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Benefits of Debt Consolidation

Lower your interest Rates

Lower your
interest Rates

Lower your monthly payments

Lower your
monthly payments

Protect your credit score

Protect your
credit score

Get Out of Debt Faster

Get Out of
Debt Faster

Debt Consolidation Alternatives

Debt Consolidation Alternatives

The debt relief industry uses the phrase debt consolidation often, where it is used to describe both payment consolidation options and options that truly consolidate your debt. If you are looking to consolidate debt because you have a debt problem, it is important to understand exactly how the term debt consolidation is used and how its use affects the pros and cons of each debt situation.

Debt Settlement Debt Settlement

Debt settlement provides an aggressive debt solution designed for people in a financial hardship who have trouble making their monthly payments or will soon have trouble making them. Debt settlement firms obtain reduced pay-off balances by negotiating with your creditors. Debt settlement harms your credit rating, but it is the cheapest way to get out of debt while avoiding bankruptcy. Debt Settlement consolidates your payments, but not your debt.

Credit Counseling Credit Counseling

Credit counseling services provide two main services. They provide budgetary assistance after reviewing your finances with you. Credit counseling services also can work to establish a Debt Management Plan for you. In a Debt Management Plan, your interest rates are lowered, speeding up the time it takes you to get out of debt. A credit counseling service’s Debt Management Plan consolidate your payment, but not your debt.

Cash-out Refinance or HELOC Cash-out Refinance or HELOC

Both of these are true consolidation alternatives. To qualify for either, you have to have strong credit, qualifying income, and enough equity in your house to borrow against. Many people with debt problems cannot qualify for either of these consolidation alternatives.

Bankruptcy Bankruptcy

A Chapter 7 bankruptcy can wipe out your debts, if you qualify. A Chapter 13 bankruptcy restructures your debts. A Chapter 13 essentially is a payment consolidation option, as you will make one payment to the bankruptcy trustee, who will distribute your payment to your various creditors.

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