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September 14, 2018

Debt Consolidation Frequently Asked Questions (FAQ)

Have questions regarding debt consolidation but don’t know whom to ask?

You can also read on below, as we attempt to answer some of the more common queries regarding the subject.

What is Debt Consolidation?

Debt consolidation is a very complicated topic for most people. Things get very complex once a large amount of money is involved.

Moreover, there is a lot of misinformation about debt consolidation. Unfortunately, a lot of individuals end up falling prey for consolidating companies which take advantage of them. These companies are included in this canon as legit companies and they end up ruining the name "consolidation". suggests that planning your debt consolidation strategy early can help significantly, as it can help you gain your power back over your financial life.

The Top Questions You Might Have About Debt Consolidation

Here is a look at some of the most frequently asked questions about consolidation debts. Hopefully, the answers get to satisfy your curiosity about everything related to consolidation debts.

1. What is debt consolidation?

Debt consolidation is a process of paying off multiple current loans with one loan. This is what is referred to as " consolidation ".

There are two ways of consolidation:- a Debt Management Plan and a consolidated loan. Debt management plans involve a consolidating company making payments on your behalf.

On the other hand, a consolidation loan requires an individual to get help from a financial lender.

Most of the time an individual is required to take up a big loan to pay off the smaller debts. This is because each loan has a different interest rate. So it would be mathematically impossible to pay all of them with a constant amount.

2. How does a consolidation loan work?

Once you take a consolidation loan then you can pay off multiple loans. You just have to find suitable lenders who will approve a large loan. When the small debts are finally paid then your only headache will be to pay off the large loan amount.

Debt consolidation is a good option for people who owe small debts to different creditors. It actually makes work easier because it will help you get rid of multiple debts which have different interest rates. In the long run, you only have one single payment that can have a low-interest rate.

3. How do you know if you need a consolidation loan?

Debt consolidation can be a good option to pay off your debts, but it might not be for everyone. It will be a good idea to get one if you owe debts to multiple creditors.

The most common type of debt is credit cards. A lot of people fail to make their monthly credit card payments which leads to debts. Moreover, when people have different kinds of credit cards it becomes hard to keep track of them. Therefore a consolidation debt will be right for this type of debt.

Loans such as student loans can be consolidated. However, they need to operate differently from other kinds of debts.

4. What are the advantages and disadvantages of a debt consolidation?


Debt consolidation gives you an easier way out of your debts. This is is because you get to only worry about one payment. Moreover, it gives you an easier time to think about your financial plan.

Debt consolidation usually saves you money. This can be either short term or long term. For instance, for a short period of time, you will get to make fewer payments with little interest.

On the other hand in a long period of time, you might get to pay less interest over the time.

A debt consolidation gives you a sense of freedom. You will feel debt free.


It is really hard for any person to get a loan if they have bad credit. This is as a result of not making payments on time. A lot of financial lenders will look at your credit score and if they don't like what they see, they are likely to reject you.

Debt consolidation is also a debt in itself. Thus you have to make regular payments. Even if you end up paying off a debt, if you don't have a financial plan then you are likely to sink more in debt.

5. Is debt consolidation guaranteed to work?

Debt consolidation doesn't guarantee you will get out of debt, it is your attitude. A debt consolidation is only meant to make paying debt easier.

Old habits die hard. Individuals who have taken up debt consolidation tend to get back to credit. This is because once they pay their old debts they will run some new credit cards and the vicious cycle repeats itself.

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