Debt Consolidation Options

Debt consolidation is a word that is heard quite often though its meaning might not be entirely clear.  Simply put, debt consolidation is when you take a good portion of your debts and consolidate (or combine) these into one or two larger debts.  There are a few different ways you can go about this process.  Let’s take a look at them.

In order to consolidate your debts, you need to reach out to either your creditors with a plan for reducing your debt, or you can contact a third party lender in regards to taking out a loan to consolidate your bills.  Another very popular method is going through a debt consolidation company.


There are many debt consolidation companies available today to help consumers overcome their massive debts that they’ve accrued.  Basically what you would do is contact the company that you are interested in working with, and they will share information on the process and what is involved.  Very often you are asked to sign a contract stating that you will not open any additional lines of credit during this time.  You will also be asked to assure that your monthly payments will be made on time.  Once this is agreed upon, the agency reaches out to your creditors and a specific amount is settled upon.  Your money is deposited into the account of the debt consolidation agency, and in turn, they will pay your creditors for you on time each month.

There are different agencies that are available with different principles.  For instance, those who have a Christian or biblical set of standards toward money and finances may wish to work with a Christian debt consolidation agency.  For others who are more secular in view or who keep their faith and finances separate, there are many non-affiliated agencies available.

If you’re looking to reduce your debt so you can be closer to financial freedom, you will definitely want to consider debt consolidation.  It can help you get rid of costly revolving debt, while avoiding bankruptcy and the harsh stain it leaves on your credit report.

Pros and Cons of Debt Consolidation

It seems like everywhere you look there are advertisements for debt consolidation services.  Many of these companies promise you freedom from high payments, extreme interest rates and demanding creditors.  But is it worth it?  Let’s take a look at the benefits and disadvantages of debt consolidation.

One of the best things about participating in a debt consolidation program is reducing your multiple monthly payments.  Once you go through the process, you have only one payment to make each month with one interest rate, rather than five payments with five varying rates.  Also, the interest rate on your single payment is often reduced because that is often an added bonus of going through the debt consolidation program.  Additionally, you will see lower monthly payments since you are no longer paying multiple creditors with higher than average interest rates.  Plus, many times those who take advantage of consolidating their debt will be entitled to tax breaks.
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Debt Settlement

Debt settlement is often the fastest and easiest method of seeking debt relief.  It’s often referred to as debt arbitration or debt negotiation, and it is a direct and ambitious approach to reducing your debt.  This type of debt relief is best suited for those who are considering bankruptcy.

There are two ways you can go about this.  Sometimes a consumer will contact his or her credit card companies outright and seek debt settlement services directly from them.  Normally there is a specific department that handles it and once the consumer is in touch with the correct individuals, the process can begin.  The only problem is that not all companies cooperate as well with individuals as they do with debt settlement companies.
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Student Loan Consolidation

Student loan consolidation is a great way to lessen the burden of your educational debt after graduation.  Many students take advantage of it because of the many benefits it offers.

One of the best reasons to for student loan consolidation is to reduce your monthly repayments.  A combination of a lower interest rate coupled with an extended term help keep monthly payments low.  Another great benefit is the fact that your interest rate will be reduced.  This can save you thousands of dollars over the course of the loan provided the terms are the same.

Another great benefit of student loan consolidation is getting relief from endless creditor contact.  So if you’ve fallen behind on multiple student loan payments, consolidating your debt will help stop the constant barrage of creditor calls.  An additional incentive to doing this is achieving the genuine peace of mind you’ll get from knowing that you can easily afford your reduced monthly payment.
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Consumer Credit Counseling Help

If you find yourself drowning in debt and being unable to keep up your monthly payments, consumer credit counseling can be a huge help.  These services can assist you with lowering your monthly payment while working out a reasonable budget on which to live.  More often than not, many times your interest rate will be lowered when you seek debt counseling services.

Consumer credit counseling normally works with revolving lines of credit and won’t be able to help you with your home or auto loan.  That being said, when you secure the services of an agency, reducing your credit lines will help you manage your home and car loans much better.

When you decide to sign up for debt counseling, more than likely you will be required to sign a contract that will indicate that you are responsible for paying your bills on time.  You also promise not to apply for any additional lines of credit while in the program.  This keeps you from falling into more debt.
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