Debt Consolidation Introduction and FAQ’s

This debt consolidation page is designed to give you a general overview on what debt consolidation is and how it might be able to help you. The decision to enroll in a consolidation plan can help to improve your long-term financial health. It can make your existing debts easier to pay off and can save significant amounts of interest.

A bank could help you get a debt consolidation loan, but there is another type of business a you might consider visiting before visiting a lending institution. You may want to consider a firm that specializes in financial planning first. The planner can help you determine if you can qualify for such a loan and if it is a good idea.

Is Debt Consolidation for me?

If you understand the reason for your financial debt, then you are the type of person that will have the best chance to stay debt free in the future. If not, then this plan is only temporary and will not work that well or you. Once you understand how you wound up in debt, then you can decide the best consolidation plan that will work for you. Many people get into debt by borrowing more than they can repay. This can also happen on a debt modification plan. Many people are told to take a good long look at their income and income obligations. With this information it will help to determine if you can commit to a debt consolidation loan repayment plan.

What the Loan Can Do For the Borrower

A debt consolidation loan is transferring all your account balances together for one monthly payment. Is can really be great move to get into Debt Consolidation, but only if you really want to change the way you manage your money. When you can bring all your debts into one loan, you will be set on the path to being debt free. This means lowering interest rates and paying off your debts quicker.

Is Debt Consolidation a Good Idea?

Debt consolidation is a proven debt solution strategy and has helped many people. But you will have to decide if it’s a good idea for your particular situation.

A borrower secures a loan with a lower interest rate, and these funds will cover a previous loan. Many debt consolidation loans are unsecured, but there are some that are secured and therefore requires collateral, such as a vehicle or a house – so be sure to ask questions and be totally aware of this when considering different debt programs. Because if for some reason you default on a secured loan, you could wind up losing your property.

Steps for acquiring a consolidation loan total all amounts owed. Check the interest rates of each balance, select the collateral (if any) for the loan, and move forward by submitting the required loan application.

Will Debt Consolidation Hurt My Credit Scores?

Debt consolidation does not push down credit scores, but rather, helps improve them – that is IF you can build a nice history of payments. By making these payments you are making improvements. This is a good way to restore your financial situation. And the lower rates can help make the repayments easier on you.

38 thoughts on “Debt Consolidation Introduction and FAQ’s

  1. All of this is good advice. The only real problem stemming from having debt in the first place is the inability to control oneself. Never live beyond your means.

    1. Yes that “inability to control oneself” applies to many people in debt, but sometimes it’s just due to tough unexpected circumstances in person’s life that sends them down the spiral of debt. The important things is to realize that there are professional debt solutions available.; bad debt woes do not have to be permanent.

  2. Debt consolidation has similar pros and cons compared to taking out a loan from a bank. It really depends on the financial stability of the situation. A debt consolidation loan should have a fixed interest rate that is lower than what you were paying, which reduce your monthly payments and make it easier to repay the debts.

  3. The catch lies in the statement “If you understand the reason for your financial debt”. For a person who develops a habit of financial debt and is not willing to change her/ his spending habits, it may be be even more difficult to handle and repay a consolidated debt! However, debt consolidation is certainly a great and efficient means to manage financial debt, for someone who truly understands the obligations of having and repaying debt.

  4. Debt consolidation is a great opportunity to grab when wants to get debt free in the future. However, it will require a lot of sacrifices and discipline. A lot of debt consolidators demand that you will agree to close your little plastic card that you can never leave home without. Nevertheless it will be still a small sacrifice to handle than paying huge interests month to month and running into the risk of getting into collections.

    1. Thanks for your comment Olive. Yes, any debt solution program will take some type of discipline, but as you’re stated, it’s a small sacrifice.

  5. Won’t the debt consolidation hurt my current way of life? I mean it is deducting my interest rates but at the same time the payable principle amount in a single month is higher no?
    I am someone with less economics knowledge and would be grateful if you could explain me this further and thank you for this informative article.

    1. Hello Ethan, it really depends on your arrangement your chosen debt consolidation company. With a debt consolidation, all of your individual unsecured deb such as credit cards, personal loans, etc. will be rolled into one new loan with an affordable payment and comfortable interest rate that you’ll have an opportunity to agree on. The whole idea of debt consolidation is to make the repayment process of various loans less stressful and more convenient for you. So it should help, not hurt, your current way of life.

  6. Debt consolidation is a sound step one can take in insuring their future financial health. The process of monitoring debt is a lot easier and simpler in this process which would leave you minimal room in missing out payments or forgetting some of you debts. I believe this is a very good practice people can start looking into. It may not necessarily push credit scores but hey, if you don’t forget to pay your debts, your financial health may just improve as a whole. In a nutshell, this is very good idea. Something that one who is struggling to manage debts can start to adapt

  7. This is great information for people that are struggling with different type of debts at the same time, Debt consolidation will definitely help them to manage properly their debts making it just one and will make easier to complete payments.

  8. Ahh! This is great reading actually It’s very common in urban society that everyone has debts. Most of them even have too much debt in different accounts. However, sometimes the problem appears when the borrower gets a limited amount of credit and is not enough to bear all current debt, while their income never matches the credit they get from the first place, which makes them fall into other debt, not solve the problem from the beginning.

  9. Personally reflecting on the reason why you are in debt in the first place is not only the first step in organizing yourself in such a way as a Debt consolidation plan but setting up a plan as suggested would most likely ensure that you achieve your main goal as far as settling debts is concerned.

  10. This sounds like a great option when you want help paying financial needs. What calls my attention the most is with debt consolidation cure you can recover your credit score, by making easier payments. If you are responsible enough to keep up with your payments I think this is an awesome way to get rid of debts in a long term.

  11. This is actually a good idea. I’m a working mom and my salary is not enough to cover our expenses. There are moments that I had to borrow from different persons sometimes lending companies too. So this is actually a good option beacuse instead of paying several people like for example every payday, I will only need to pay one loan, in that case I will still have extra money from my salary. Thank you for sharing this idea.

    1. Yes it can definitely be a good debt relief option, especially for a working parents struggling to make ends meet. Thank you and everyone else for your comments.

  12. Wow, thank you for this sharing. People have their own reasons for choosing to borrow to settle their financial problems and I think debt consolidation is really helpful for them to make the payment without worrying their current financial. I’m not really a debt guy and I keep telling my self to stay away from it. But if in the future I ended up having loans, I can consider this as an option to make my payment easier. This article really helpful.

  13. On my view, getting a loan/debt on banks is a risky trade where you can only have more debt if planned incorrectly or getting out of the loan/paying it. A normal loan on banks may make you pay more monthly but on a short time. If you are planning borrow money with the intention of paying it diligently and has the capacity to do so, then this is a great way to do it. On debt consolidation, you have lower month payment to make but also a longer years to pay for it, longer than a regular loan.
    Though, if you have a financial problem and only earn a sufficient amount to live on a daily basis, then this is a good choice as long as you will actually pay for it diligently.
    An unplanned loan is a disaster for everybody. As the interest and penalty piled up, the harder you can get out of it.

  14. Well, I would like some of my money to go into stocks and bonds! You keep your money to some corporation and allow them to earn depending on the agreed upon rate. While doing my job, I also earn money too! But i would research more on this topic.

  15. Wow! Thanks for sharing this article! I never knew that there’s even an alternative like this. On the other hand, it would really be easier not to even let yourself go this path if you’d be prepared earlier in life. I feel that it’s a matter of being wise on how to manage your expenses. But to actually know that at least we have debt consolidation as an option is a great help.

    1. Thanks for your comment Marie. Please do keep in mind that oftentimes getting caught up in the web of debt is not a choice, but many times it’s circumstances beyond a person’s control.

  16. Despite its pluses, this debt consolidation scheme is really for the banks that find it so hard to collect from their debtors. And i dont think a person will really become”debt- free in the future”. Instead he will become more prone to making loans, as it now seems a status symbol to own a credit card or have a bank loan.initially the loan consolidation will seem to be helpful.but since it is human nature to desire ownerships, the cycle of making loans starts again.hence, the person will be more engrossed in debt in the future especially if he finds other sources of income as loan collateral.

  17. The idea of Debt consolidation is perhaps the most hassle-free and cost-effective way of managing your money matters. The very fact that people will learn and manage their bills and loans with minimum debts is a great way for savings and for the economic stability of one’s country. It’s even much more profitable as the borrower brings all his money under one account and can pay-off his debts faster. Even your credit payment management can be improved by Debt Consolidation.

  18. Thank you for this post! I was quite wary beforehand about consolidating debts, thinking it was just another banking scam- but this has put my mind at rest and I think it might be the best way for me to go. Would love to know about someone’s personal experience of it, though? I think I would definitely prefer the unsecured loan, as securing collateral seems risky in my opinion.

  19. Thank you for reminding others to be aware that not all loans are unsecured. It’d be terrible to enter into a debt consolidation plan and wind up having to use your home or car for collateral! Great job also recommending not to go straight to the bank, but to shop around.

    1. You’re welcome Celine. Yes, banks are no longer the only financial option anymore. The world has change and solutions have evolved. Thank you and all others for your comments and feedback.

  20. “Debt consolidation does not push down credit scores, but rather, helps improve them”. Indeed it is, I had some real bad debt and went on with a process like this one and, man! it got me back on track. You just have to be very organized when it comes to making your payments and in no time you’ll be in the clear.

    1. You’re right Johnny, the key is “to be very organized when it comes to making your payments”. There is no magic bullet.

  21. Debt Consolidation is a very good idea indeed, not only will it keep you from paying a build up of interests from unpaid credit, but it will also be convenient to pay a single debt instead of many others. I will definitely take note of this infomation for future use.

  22. Thanks for this insightful article about debt consolidation! I myself do this and I find it easy for me to manage my finances. Sure, there are cons but the pros outweigh them. Cheers!

  23. I am lucky to see this blog about debt consolidation. I have been looking around for advice because I have been in deep quandary on how to solve my credit card problems and another personal loan due to job loss a year ago. I will now talk to my credit card company if this I could avail of debt consolidation.

  24. Debt consolidation is definitely an opportunity to manage your debts stress free. The fact that your credit rating is not damaged is a definite advantage. Debt consolidation and a balance of household finance management is needed to successfully wipe debts.

  25. Debt consolidation is beneficial for borrowers with several debts. Because it allows pooling of all debts, the borrower only needs to monitor one loan. This results in simpler financial management. While debt consolidation significantly aids towards being debt free, the responsibility still lies on the borrower’s commitment to fully pay of his/her debt. No amount of financial solution can help if the borrower is not disciplined in paying.

  26. It is definitely tempting to think about taking out a nice big consolidation loan, pay everyone off, and only deal with that one monthly loan payment – one you can even have automatically taken from your checking account every month. But you must also be committed to change your spending habits and start taking control of your finances.

  27. Now I understand debt consolidation, and I would want to transfer all of my account balances together for one monthly payment. It seems like a good idea because now I can bring all of my debts into one loan, focusing on just one payment instead of many.

  28. Debt consolidation seems to be a great idea on the surface. However, the caveat in this is that debt consolidation itself is a product of a financial institution. As such, financial institutions will not offer them without getting any profit in return. Sure, the interest might be smaller but it is still another problem on top of an existing problem. Anyone who engages in debt consolidation must be made aware that if the spending habits are not changed, they’ll just continue spiraling down and create even larger debts.

  29. Debit consolidation has made paying my college loans off a much easier and stress-free process. I had multiple loans and was able to make one payment to one financial institution, rather than pay different amounts of money to several different institutions. I locked down a great interest rate and have been making my payments on time!

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