Are you struggling to manage all of your debt obligations? Would you benefit from combining all of your debts into one monthly payment, potentially reducing the amount you pay in interest and fees? If so, debt consolidation may be right for you.
What Is Debt Consolidation?
Debt consolidation is the debt relief strategy of combining multiple debt obligations into one monthly payment to simplify the repayment process for credit cards, loans, and other bills. Consolidating debts can help streamline your payments and make managing your debt less overwhelming.
How Does Debt Consolidation Work?
Consolidation is usually done using one of three methods:
- Debt Consolidation Loans: By using the money gained from a loan, you can quickly pay off multiple debts and instead focus on one monthly payment. This method is better for people with a healthy credit score, as a lower score could lead to a high loan interest rate.
- Credit Card Balance Transfers: The process of a balance transfer involves applying and being approved for a new credit card with low rates for balance transfers. This low interest rate is almost always an introductory rate, so make sure you read the fine print on any credit card applications to see how long the introductory rate lasts. Some credit cards even offer 0% interest rates for an introductory period on new cards.
- Consolidate Debts Through a Debt Relief Company: In addition to combining multiple debt obligations into a single monthly payment, one of the perks to working with debt relief companies is receiving help from debt relief specialists. The debt relief specialists are there to guide you on your debt relief journey while a team of negotiators work directly with your creditors on your behalf to negotiate settlements and potentially lower the amount that you originally owed.
Working With a Debt Consolidation Program
If you have the discipline to stick to your consolidation plan, you could see your debts reduced in a few years. Benefits of consolidation include:
- Simplify Payments: By merging your multiple debts into one, you reduce the number of payments, due dates, and account logins you have to remember. Having one convenient and simple monthly payment may help reduce the risk of missing a payment.
- Make Debt More Manageable: If you’re feeling overwhelmed because of multiple debts and multiple creditors, consolidating may make your debt seem more manageable. This may potentially help motivate you to stick to your plan and pay down your debt.
- Creates an End Date: Depending on your consolidation program, you may have a set end date in sight for your debt which could lead to paying down debts sooner. It could take decades to pay off debt when paying the minimum payment, and continually accruing more interest, costs and fees onto your balance.
- Potential Interest Savings: Many debt consolidation plans give you the potential to save on the interest costs of your debt through 0% introductory credit cards, lower interest rates on a loan, or by a debt relief company helping you settle the debts for less than the full balance owed.
- Possible Lower Monthly Payment: Depending on the terms of your plan to consolidate debt, you could potentially wind up with a lower monthly payment than before consolidating.
The Pros and Cons of Debt Consolidation
Depending on your unique financial situation, debt consolidation might not be your best option. Consider the pros and cons before committing to a debt consolidation strategy:
Pros of Debt Consolidation
Simplified Debt Management: Consolidated debt means you only have to worry about one payment each month, instead of multiple payments, amounts and due dates.
Pay Off Debt Faster: If you consolidate your debt, you’re much more likely to pay off debt sooner than if you continue to only make the minimum payment.
Fixed Payments: Most consolidation plans give you a fixed payment each month. With a predictable payment, you can create a budget that leaves room for other expenses or needs.
Cons of Debt Consolidation
Temptation to Spend: Debt consolidation on its own will not help you develop better budgeting or spending habits.
Consolidating Doesn’t Always Reduce Your Debt: Some consolidation strategies do not reduce the total amount you owe - you’re simply moving the debt to a new location. If you use a debt relief company to consolidate your debts, they may be able to help you reduce your total debt.
Will These Programs Affect My Credit Score?
It’s common for your credit score to drop when you first start a plan for consolidation. When consolidating debt, your credit score can be negatively impacted by whichever program you choose to move forward with, whether it be a debt settlement program, debt consolidation loan or a credit card balance transfer.
However, acting responsibly within a debt program and practicing good financial habits, despite earlier setbacks, can lead many people to see their credit score eventually go up after consolidating debts. With the resolution of a debt consolidation program, a person’s credit score may increase over time thanks to consistent monthly payments and less credit being used as you pay down your debt.
How Can I Find the Best Debt Consolidation Company?
To protect yourself from debt relief scams, work with a top-rated debt relief company that has experience helping people make efforts toward reducing debt. Most of the top debt relief companies have a large amount of positive online reviews from actual customers. This can help you verify the trustworthiness of a company.
Debt Consolidation FAQ
How does debt consolidation work?
Debt consolidation involves combining multiple debt obligations into one monthly payment to simplify the repayment process. The term refers to several types of debt resolution methods, including loans, credit card balance transfers and debt settlement.
Can debt consolidation save me money?
Yes! Although it’s not guaranteed, many people save money and time with debt consolidation. For example, debt settlement programs will often reduce a person’s monthly payments as well as their overall debt obligation.
How do I qualify for debt consolidation?
If you $10,000 or more in unsecured debts, you may be able to consolidate them. Contact a Certified Debt Specialist at Accredited Debt Relief to find out if our debt consolidation program is right for you.
How To Consolidate Debt with Accredited Debt Relief
At Accredited Debt Relief, we understand how overwhelming it is to be in debt, and our goal is to put your best interests first. We’re ready to review your unique financial situation and help you find the best debt relief solution.
You can get started with Accredited Debt Relief by applying online or calling us at 800-497-1965. We’ll then put you in touch with one of our certified debt specialists, who will review your current financial situation and provide you with a specialized debt relief plan. If you stick with your tailor-made program, you can reduce your debt in as little as 12 to 48 months.
With an A+ rating from the BBB, we’re committed to helping customers with honesty and ethical business practices. Accredited Debt Relief is also an accredited member of the American Fair Credit Council (AFCC). Learn more about your debt relief and consolidation options by contacting Accredited Debt Relief today.