What is Debt Consolidation and When Is it a Good Option?
When it comes to dealing with debt, there are many terms that may be unfamiliar or unclear. Debt consolidation is one of them. What is debt consolidation, exactly? And most importantly, can it help someone get out of debt more quickly and save money in the process? Let’s take a look:
What is Debt Consolidation?
Broken down into its simplest terms, when two or more loans are combined into one new loan, that is debt consolidation. Most types of debt can be consolidated, including student loans, mortgages, vehicle loans and credit card debt. Many banks and lenders offer consolidation services.
Does Debt Consolidation Lower Monthly Payments?
In most cases, yes. However, it’s important to realize that by lowering monthly payments, you are increasing the length of the loan in the long term. So, while having a lower monthly payment may feel like saving money in the short term, it’s actually costing more in the long run due to paying interest for a longer period of time. However, a Debt Management Plan, which is a type of debt consolidation, can actually lower your interest rates and help you pay off credit card debt more quickly.
How do I know if Debt Consolidation is the right choice?
Before you consolidate student loan debt, credit card debt or any other debts, talk with an expert who can help you fully understand your options and the financial implications of each. You want to make sure you are making a good decision for your long-term financial health.
Where Can I Get Help?
Free, confidential Credit Counseling is a great place to begin. You can start with by completing an online financial assessment or talk with one of our certified counselors. If you’re considering consolidating student loan debt, Student Loan Counseling can help you discover options other than consolidation you might not be aware of.