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Debt Consolidation Programs

Interest rates: if anything gets in the way of paying your loans regularly and on time, it’s the interest rates. Sure, they’re pretty easy to understand, and they don’t seem too intimidating. But when you’re trying to manage debts from multiple lenders, and they all have different interest rates, then these small interest rates can seem like the one thing keeping you from reaching financial independence.

Consolidation Programs: The Basics

This is where debt consolidation programs come in handy. When you consolidate your debt, you can choose one of two options: either you can take out one big loan, pay all of the other debts you have, and just make payments toward that big loan; or, you can transfer all your balances to one credit card, and again, just make monthly payments toward that debt. Either way, debt consolidation is a way to simplify the multiple interest rates you’re dealing with, and many people find that consolidation programs make it much easier to handle personal finances.

Debt Settlements, Reductions, and Consolidation Programs: What the Differences Are

It’s important to understand that debt consolidation is not a debt settlement, nor is it a debt reduction. When you manage your debts via a consolidation program, you are not reducing the balances at all, and you won’t have to negotiate settlements with your creditors..

So what exactly is a consolidation program? Quite simply, it means that you’ll take all of your smaller outstanding debts, which you’re paying back to a bunch of different lenders, and move them all onto one account. You’ll still have the same amount of debt to pay off, but if you have a decent credit score, you might be able to earn a lower interest rate on the balance you’re paying back; at the very least, you won’t have to keep track of multiple interest rates and multiple lenders. It might take a bit longer to pay off all your debts when you consolidate them, but that isn’t necessarily a bad thing.

One of the biggest advantages of debt consolidation programs is that they don’t always affect your credit score. Many people choose to consolidate debts not because they’re having trouble paying everything off, but simply because it’s easier to manage and won’t cause their credit score to go down.

Of course, debt consolidation is still a big decision, and it’s important to make sure that it’s the best option for you. If you choose to consolidate debts by taking out a consolidation loan, that’s going to be a really big loan, and the lender is going to want collateral to ensure that you’ll actually pay it all back. If you’re confident that you’ll be able to make payments on time, then this shouldn’t be a problem. But if you think that you might miss some payments, or not be able to finish paying everything off, then you’ll be even deeper in debt than when you started.

There are quite a few options available when it comes to consolidation programs -- but this can be a good thing and this is where a financial adviser comes in handy. Of course, it never hurts to do some research on your own, and the more you can understand and organize your finances (including things like spending habits and monthly income), the better off you’ll be when you’re figuring out which type of consolidation program is right for you.

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