“What is loan consolidation?” That’s the question many consumers have when they are deeply in debt and searching for the best way to pay off their loans. Loan consolidation involves paying off a number of existing loans and debts by taking out one new personal debt consolidation loan. With just one creditor to pay each month, you should be able to stay current with payments more easily. And if the interest rate on the new loan is lower than the average rate on the existing debts, you’ll be saving money on interest payments each month as well.
What is loan consolidation?
A loan consolidation is an approach to debt relief where a person makes one payment to one lender or debt consolidation company, typically on a monthly basis, rather than multiple payments to more than one creditor. Ideally, the single, consolidated loan comes with an interest rate that is lower than those of the existing debts.
What is a loan consolidation company?
Consolidation loans are often processed by loan consolidation companies. What is a loan consolidation company? It’s a for-profit or non-profit lending agency that provides loans to individuals who want to use the proceeds to pay off a variety of debts. When considering loan consolidation, it’s important to get advice about which consolidation companies are good to work with, as there are many less-than-reputable agencies in the debt consolidation business.
What are the pitfalls of loan consolidation?
After asking “What is loan consolidation?”, your next question should be “Is this the right debt relief strategy for me?” Loan consolidation will not necessarily solve or even improve your debt problems. If you owe a lot of money, you may not be able to secure the low debt consolidation loan rates that would make a consolidation loan worthwhile. And if you’re managing debt consolidation with credit cards and transferring balances from one card to another, you’re likely only prolonging the work you need to do to get out of debt.
What resources are available to help with loan consolidation?
For consumers who want to know “What is loan consolidation?” and “What other options are available to me for paying off debt?”, American Consumer Credit Counseling (ACCC) can help. As a nonprofit agency providing free credit counseling, we can help you understand all the strategies and resources available to you for getting out of debt and staying debt free in the future.
Contact a certified credit counselor at ACCC to get answers to questions like “What is loan consolidation?” and information about how to pay off credit card debt more effectively and how to pay off debt faster.