For those who find themselves trapped in overwhelming debt, a debt consolidation loan may be the answer. Debt consolidation loans may lower interest rates and decrease the stress of dealing with multiple loans.
What is a debt consolidation loan?
A debt consolidation loan is a way that many choose to handle large debts to multiple creditors. It is one way to simplify your monthly payment. It involves taking a loan out from a bank, credit union, or other financial institution to pay off all of your creditors. This rolls your debts into one monthly payment to the most recently lending institution. This allows you to pay the bank back over time and prevents multiple monthly payments.
Debt consolidation may be a great solution for those who
- Are drowning in credit card debt
- Are falling behind in payments
- Borrowing from one card to pay another
- Being harassed by your creditors
- Feel stress from multiple monthly payments
Often, debt consolidation may result in a lower overall interest rate by allowing you to pay off the debts which carry very high interest rates, such as credit card debts.
Generally debt consolidation can be used to account for debts involved with:
- High interest rate Credit Cards
Magazine/Record clubs
Department Store Cards
Tax Debt
Medical Bills
Legal bills
Personal loans
Health club memberships
Signature loans
Repossessed vehicles
Student loans
Collection Agencies
Bills from a previous residence (old utility bills/cable bill)
Tip: Tara McCarthy, Auriton's Director of Education, says "A lot of consumers have a tendency to continue to use their credit cards after they have consolidated their old debt. This results in increasing their total debt load and severely limiting their ability to repay all outstanding debts."
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