Debt Consolidation, Quickly Explained

Debt Consolidation, Quickly Explained

Let’s look at what debt consolidation is and how it can help you get out of debt faster.

Debt consolidation is the process of combining multiple debts into a single payment.

For example, a homeowner could use a home equity loan or line of credit to pay off credit card balances, medical bills, or even their car loan.

Someone who doesn’t own a home can use a personal loan to pay off debts in this way.

The main reason people consolidate debt is to save money.

Home equity and personal loans usually have lower interest rates than other types of debt, like credit cards and payday loans, so you’ll have a lower monthly payment.

Another reason is to simplify your finances.

Instead of keeping track of multiple bills and due dates, you’ll only have one payment to make each month.

When choosing a loan for debt consolidation, consider any fees or closing costs, which will affect how much money you save.

And, once you’ve lowered your payment, avoid the temptation to spend more. Your goal is to reduce and eventually eliminate debt.