Posted on May 19, 2009 at 2:38 am Debt consolidation is the replacement of multiple loans with a singleloan, often with a lower monthly payment and a longer repayment period.It can also be called a consolidation loan.

Posted on May 19, 2009 at 7:51 am Vaibhavbasal- Debt consolidation comes in several forms and the term itself is now used loosely to describe (typically) one of the following: A traditional debt consolidation loan is when the debtor takes out a loan to pay off all of their debts, and in return they make one payment per month to the lender who extended the loan to them. Typically, these loans are extended with high interest rates and they can take a very long time to pay off. Credit counseling is also referred to as debt consolidation. A credit counseling agency works with the individual's creditors to try and reduce their interest rates on each card. In the meantime, the debtor makes one payment to the credit counseling agency, who disperses monthly payments to each of the creditors. Debt settlement has also been referred to as debt consolidation. People enrolled in settlement programs make one monthly payment to the settlement company which is held in an escrow account (typically set up in the debtor's name). In the meantime, as money accumulates in that account, the settlement company works to reduce the principle amount of debt with each creditor until they can settle the debt for a reduction of what is owed. Each debt consolidation option allows the debtor to make one simple monthly payment as opposed to dispersing payments to all of their creditors. Debt consolidation can be particularly helpful for people who have multiple creditors, high interest rates, or need a reduction in the principle amount of debt to ever satisfy their financial obligations with each creditor they owe. Determining what debt consolidation option may be best for you is the key issue. You may want to fill out a form on this website to see if you can get some help finding the right debt consolidation option considering your specific financial circumstances.

Posted on May 19, 2009 at 11:32 am Frederickr is correct with his assertions in regards to debt consolidation. I would like to further add that certain people (depending on their circumstances) may be better suited for one of the three previously mentioned debt consolidation options. 1) Debtors who have a low debt amount but are only making minimum payments and have high interest rates on their cards may be well suited for credit counseling. People who are in this situation may be paying off interest only every month, and as a result cannot put a dent into their principle debt amount. If the credit counseling agency can reduce the interest rates on the cards, then a person facing these circumstances could potentially pay down their small debt amount in a relatively short period of time. 2) Debtors with higher debt amounts (over $10 K) who have average to high interest rates on thier cards (15-30%) may want to consider debt settlement as a consolidation option, unless these people are paying a significant chunk of the principle debt down each month. If they are not, then it is quite possible that an individual facing these circumstances will pay back between 3-4 times what they originally borrowed. Furthermore, someone without the financial ability to pay down their principle debt each month will not be debt free for a very long period of time. Debt settlement programs typically range from 2-3 years, and can assist people with high debt amounts become debt free fairly quickly when compared to their other options.

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