What exactly is debt consolidation? While many may have heard of this term, to a consumer that is new to credit, the whole process can be a bit confusing.
Debt consolidation involves combining outstanding debts into just one debt, which can result in lower monthly payments. So, what exactly does that mean? Say a consumer has two different loans or credit lines; this means two completely separate monthly payments at possibly different rates and terms. With a consolidation loan, you are combining those two debts into one loan and one payment.
What is the main purpose? There are a couple different reasons a consumer would be looking into a consolidation loan. One being to lower the interest rates, and therefore, lowering the monthly payment that they would usually have to make. Another reason is just the simplicity. It is much easier to remember to make one payment instead of multiple, simplifying your monthly budget.
Debt consolidation loans can be extremely beneficial to consumers with multiple debts that they are looking to conquer. Just remember, the point is to reduce your debt. Consolidating your debt doesn’t work if you just continue to gather more; stay disciplined in reducing your debt by not accruing more to make these loans work for you!
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