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What is Debt Consolidation?

The term credit consolidation represents combining multiple credit card debts into a single loan. Instead of dealing with various sources, you can simplify your finances and send payments only to one lender.

Debt consolidation can be used for different purposes. Primarily, it is used to tackle credit card debt since it the most common type. Additionally, this method can help you with medical bills, personal loans, or any debt that doesn’t require putting up property as security.

You have many options when it comes to resolving your debt and debt consolidation is one popular option for many people. Debt consolidation is the combination of several unsecured debts—payday loans, credit cards, medical bills and other debt.

Credit card consolidation is not the only solution and it’s not always right for everyone. It’s important to understand your options for credit consolidation services to find the option that is right for you. When we don’t offer debt consolidation, we do offer debt settlement services.


Debt consolidation is the process of taking out a loan to pay off all other smaller loans and bring your many loans into one bigger loan. You’ll be expected to make monthly payments on this larger loan. The process streamlines and consolidates credit card debt into one simple payment.

For many, this can save a lot of headache by eliminating the sheer paperwork from multiple credit card loan debt paperwork that comes in each month. Debt consolidation options are offered by a company just like DebtQuest USA and can be a great option if you qualify and if credit consolidation makes the most sense for your situation.


How Can Credit Card Consolidation Work For You?

Credit consolidation services allow you to borrow money to pay off your existing debts. After the previous debts are repaid, you will need to pay off your new debt to the service. Going forward, you may save money on this debt rearrangement.

Ideally, the new loan should have more favorable terms compared to the existing ones. It can be a smart solution to reduce your interest and lower your monthly payments. Potentially, you can contribute more money to your minimum payments and become debt-free sooner.

For example, you may have two credit cards with balances of $6,000 and $3,500 with the same annual percentage rate at, let’s say, 25%. If you consolidate them at a lower interest rate, you will essentially create one debt of $9,500 – but the best part is that you can significantly reduce your interest rate.

How Do Credit Consolidation Companies Work?

Specialized companies help you establish a baseline detailing your income, the total amount you pay for credit cards, interest, etc. They add up your expenses and determine how much you can contribute to your debts. For many people, the amount that is left in their budget is not enough to handle their debt, and they move closer to declaring bankruptcy.

And this is where a debt consolidation loan or debt management program comes in handy. Credit card debt consolidation completely changes the structure of your current debts and merges them into one lump payment. Thus, these solutions reorganize your debt and help you track your progress as you eliminate it.

Once a specialist evaluates your situation, they will determine whether consolidation will work in your case. If it does, you will enjoy the perks of having lower monthly installments, convenience, and simplicity. The most critical condition, however, is that you follow the plan precisely and never miss your payments.

In addition to smartly managing your debt, a debt consolidation company makes the situation less stressful. Creditors tend to be very annoying and persistent with their calls. But when you enter a relief program, the situation will be handled by a specialized company. Your further communication with the company can be conducted online. This way, you can focus on growing your income instead of constantly explaining your situation to creditors.

Credit Card Debt Consolidation Loan Options

When you are considering your options and thinking about credit card debt consolidation, you need to make sure you understand a few things. One, you still owe the outstanding balance. Credit card debt consolidation is the process of simplifying your loan and debt situation, but it doesn’t mean that that debt disappears instantly. Credit card debt consolidation simply combines all of the debt into one simple loan and makes it a little more manageable for you to focus on paying that debt off. For many, this is a tangible way to approach outstanding debt and be able to move forward.

Is Debt Consolidation a Good Idea?

A huge benefit to using a debt consolidation loan is making your repayments more manageable. By merging everything into one loan, you remove the hassle of making multiple payments throughout the month, each with their own fee.

If you consolidate credit card debt, you can also extend the payment period, which, in turn, makes the installments lower. For many people, it can be a game-changer. The lower the payment, the more likely you will stick to it.

Credit debt consolidation is a good idea in the following situations:

  • When the number of debts to keep track of is overwhelming. When you remove the inconvenience of having many debts, it feels like a weight has been lifted off your shoulders.
  • When you have high-interest rate credit cards. Consolidation is often aimed at reducing the amount you pay for interest with a lower-interest loan.
  • When you have a detailed plan of action. A debt relief company comes up with a customized plan that will address your financial struggles. The new payment strategy will cover everything – from the new terms with your lenders to recommendations for your spending habits.

Debt Consolidation for Good Credit Scores

Your credit score is vital to any loan, and credit card consolidation is no exception. Your score helps creditors to determine your creditworthiness, meaning how likely you are to pay the loan back. The higher your score, the more confident creditors will be in your financial abilities.

Interest rates on debt consolidation loans vary significantly and can reach as high as 35%. It is only fair to look for low-interest loans that will be beneficial compared to your current interest rates. Luckily for people with a high credit score, the best debt consolidation plans are reserved for them.

Since one of the biggest benefits of consolidation is reducing your interest, making sure to achieve the best deal possible. The good news is that a credit debt relief company is more likely to negotiate excellent terms if you have good credit scores. Lastly, a high credit score provides a safety cushion in case the new arrangement temporarily damages your record.

Debt Consolidation for Bad Credit Scores

It makes sense that borrowers with excellent credit receive the best terms. However, people with average or even bad credit scores still have a chance to get approved. Here are ways that will help you get debt consolidation loans for bad credit:

  • Check your credit report – You may discover some erroneous accounts or inaccurate missed payments. Even if the mistakes in your report are insignificant, they can make a difference in the outcome.
  • Add a co-signer – If your potential co-signer’s credit score exceeds yours and they agree to help you out, you may qualify for a lower rate.
  • Improve your debt-to-income ratio – Lenders tend to use this metric to assess your ability to repay a loan. If you make this figure more appealing to them, your chances of better terms are higher.

If you decide to pursue a debt consolidation loan, remember that not all loans are created equal. You don’t want to be taken advantage of simply because you have a bad credit score. An expert will select the best one possible so that anyone can benefit from consolidation.

Debt Consolidation with a Loan

In a nutshell, a debt consolidation loan involves taking out one big loan, which you use to pay off your current debts. Thus, instead of dealing with multiple repayments schedules, varying sizes, and interest rates, you create a simplified arrangement.

Since you have only one lending institution at a single interest rate, it will be easier to calculate your monthly budget. Also, you are less likely to forget about making a timely payment since you need to do it only once. You can even automate the process and have it sent at a specified time.

However, you need to take this new loan seriously. Obviously, your goal is to improve your financial situation, not make it worse. Therefore, determine whether the new payments terms are reasonable. If you fail to stick to them, you will do substantial damage to your credit.

Debt Consolidation Without a Loan

A credit counselor arranges a debt consolidation program. They contact your creditors and act on your behalf to help you pay off your debt over time. They negotiate the terms when your debts are combined and reduce your interest costs significantly or entirely.

Such debt management plans involve you paying the agency, and they will contribute payments to creditors on your behalf. This way, paying off the loan becomes more accessible and faster without the need to take out an additional loan.

Debt consolidation without a loan can take other forms, such as mortgage refinance and balance transfer:

  • The first option implies getting a new mortgage to replace the original one. As you repay your debts with the old mortgage, you will be left with only one new one.
  • As for balance transfer, if you are accepted, you can take out a new credit card with zero interest and transfer your other unsecured debts to this card.



Alternatives to Debt Consolidation

Debt consolidation helps with making progress with your debt and putting more money toward your balance. However, it’s not a magic bullet. Even if these alternatives to debt consolidation don’t suit your situation, you should be aware of other options you have:

  • Create a budget – Set realistic debt pay-off and savings goals. If you have insignificant debts or if your income can sustain them, you may be able to recover from debt with a well-thought-out financial plan.
  • Get out of debt using the avalanche method – You can focus on paying off revolving debts with the highest interest rates. This method is not the cheapest, but it will save you money down the line.
  • Consider the debt snowball method – In this case, you tackle the debts with the lowest balance. It will help you completely eliminate some of your debt and motivate you to keep moving forward.

In any case, you will benefit from having your financial situation evaluated by a professional. Whether you decide to enter a program or not, an expert will explain your options and help you select the most suitable one.

Make Paying Off Your Debt a Priority

If you want to accomplish your financial goals, you will need to put effort and dedication into it. Don’t let the initial discouragement of getting into debt paralyze you. Tackling your debt should become your priority – and consolidation can become an essential start of that journey.

“I need help with debt consolidation” – then you have come to the right place. We will explain what additional steps toward financial stability you need to take to make sure you never end up in a similar situation. Our goal is to equip you with the tools to move forward debt-free, even without our help.

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