Consolidate Debt

Debt Consolidation Loans Companies Debt Made ClearSM       Home

Consolidate your debt

What - Definition. Consolidate Debt - To rationalize some existing borrowing into a different creditor account.

Consolidate Debts
When you consolidate debt you bring together or consolidate debts of two or more balances owed into an existing or a new credit line. For example, you could consolidate your debt by paying off a debt using monies from an existing credit line, like a bank overdraft or home equity line of credit or you could pay off two loans with the proceeds from a new loan in order to consolidate your debt.

The goal when you consolidate debt is to transfer the entire balance owed to a different creditor - so ending your financial responsibility to the original lender. In this way, you not only consolidate debt, but also consolidate the number of creditors that you owe.

consolidate debts

Whilst it is possible to partially consolidate debt balances, this is not the common definition. To consolidate debt by popular definition involves reducing the number of creditors.

Why Consolidate Your Debt?

You may ask why consolidate your debt. The most common reason that people consolidate debt is to save money in the form of lower interest repayments. In simple terms when you consolidate debt, the interest rate applicable to the new larger balance is lower than the rate on the creditor account/s to be paid off.

How To Consolidate Debts?

consolidate debtsThe decision to consolidate debt is actually more complicated and to consolidate debts, depending on the types of credit lines involved, can require some degree of analysis. Factors to consider when you consolidate debt include (but not limited to):

 

  • Interest rates applicable to the debt. Consolidate only where there is sufficient incentive.
  • Secured versus unsecured debt. Consolidate wisely.
  • Fees involved, potentially at both ends of the transaction (e.g. origination fee and repayment penalty)
  • Terms for the new balance including introductory rates and repayment period
  • Credit history/score
  • Time and hassle to consolidate debt
  • Requirement for or use of a service provider to consolidate debt
  • Implications of using alternative sources of funds to consolidate your debt.

 

Consolidate Debt Versus Consolidate Your Debt Repayments 

"Program" and "Settlement" are familiar services on offer to those looking to consolidate debt. Neither service works to consolidate debt, that is, brings debt into one account or reduces the number of creditors. What happens with these services is that you consolidate your repayments or your "bills" into one. Debt is not consolidated because each balance remains, nor is there any reduction in the number of legal creditors.

Whilst there are benefits to these services and lower interest rates are a feature, the only strict way to consolidate debt by definition is to pay off a creditor immediately and "transfer the debt" to another. This involves using monies from a new or existing loan, or from another source.

In order to provide the broadest service to those looking to consolidate debt, this website discusses both /all types (consolidate debt and consolidate debt repayment services/options).

Methods to Consolidate Debt

1. Loan - Consolidate Debt Loan known as a DCL  
2. Other Loan Alternatives - May be used to consolidate debt. Loan personal options depend on circumstance. They     can include actual personal loans to consolidate debt and more
3. Other Non-Loan Alternatives - Not a loan to consolidate debt, personal potential funding sources

Methods to Consolidate Debt Repayments

1. Debt consolidate under a Plan/Program 
2. Debt consolidate though Settlement 
3. Private Techniques

All methods are referred to in general as "consolidation". This is a generic term that covers both sets of approaches to dealing with debt. Consolidate to take advantage of lower interest rates. This is the common ground that all methods to consolidate debts boast as the primary reason for acting to consolidate debt.

When To Consolidate Debts?

Your credit worthiness as measured by the bureaus in the form of a credit score/report can impact the choices available. It is however possible to consolidate debt with bad credit. Furthermore, the options available through which you may consolidate debt are impacted by additional things such as:

  • Homeowner with equity
  • Are you seeking to consolidate debt that is secured or unsecured
  • Exactly what type is it.
  • Do you have funding alternatives
  • How much is the debt
  • Are you suffering financial hardship by definition

Many people look to consolidate debt in response to financial pressures or where they have begun to default hoping that this can fix their problems. In other cases people look to consolidate debt as a strategic move to cut costs and may not be having financial difficulties as such. Whenever you seek to consolidate debt or consolidate debt repayments using a third party service then you need to be particularly careful as to which company you select, especially if the provider is part of the debt services industry, as opposed to an outside provider such as bank or credit union. Elsewhere on this site you can read up about methods, services, pros and cons and pitfalls when you look to consolidate debt. There are unscrupulous operators within the debt industry who take advantage of those looking to consolidate debt. At best this can mean higher than necessary fees to consolidate debts or at worst theft of your money and or identity as you attempt to consolidate debts. A decision to consolidate debt is an important one and thus requires some understanding and research about how to consolidate debt online. 

Consolidate debt help - your debts resource. We show you how to consolidate debt help you find resources and understand your alternatives. Our goal is to explain the choices available to consolidate your debt as clearly as possible and to clear up the confusion that you'll find elsewhere, helping you consolidate debt with confidence. Before you consolidate your debts, see our summary of Debt and Consolidation











Debt News:

- Tips
Follow this Blog

- Q&A
Is consolidation a good idea?

- Did You Know>
About consolidation Non Profit