Debt consolidation is a type of debt refinancing that allows consumers to pay off other debts. In general, debt consolidation entails rolling several unsecured debts, such as credit card balances, personal loans or medical bills, into one single bill that’s paid off with a loan. There are dozens of ways to go about consolidating debt, and some include transferring the debt to a zero or low-interest credit card, taking out a debt consolidation loan, applying for a home equity loan or paying back your debt through a debt repayment consolidation plan. When researching consolidation plan options, you may come across what’s known as debt consolidation companies. Some of these debt consolidation companies are legitimate; according to the Consumer Financial Protection Bureau, however, others are incredibly risky. That’s because some may be debt settlement companies that convince you to stop paying your debts and “instead pay into a special account,” the CFPB warns. “The compa...
Debt consolidation can help you pay off what you owe faster and more conveniently, with one payment instead of many. But if you choose the wrong method, you could waste your money and end up deeper in debt. The first step is understanding what debt consolidation is (and isn’t). Then you need to decide whether it makes sense for you, and how to pick the best method. Finally, you need to shop smart. Here’s how. Table of Contents Learn the Terms Know Your Options Understand Your Situation Shop Around for Lenders Debt Consolidation Isn’t for Everyone Learn the Terms Debt consolidation means you’re replacing many smaller debts with one larger one — for example, transferring all your credit card debt to one card or line of credit. Or taking out one loan to pay off multiple balances. Either way, you’re making one payment a month instead of several. Ideally, you would also pay less interest and therefore pay off the debt faster. Debt management...