Debt Consolidation

Definition

Debt consolidation is when a person obtains a larger loan to pay off a number of smaller debts. By doing this it ‘consolidates’ all of the debts into one loan payment. 

People use debt consolidation to pay off smaller loans, credit card balances, bills, overdraft balances, anything that can be paid off.

Debt consolidation loans are issued by credit unions and banks and you must apply and be approved for a larger loan to be able to pay off the smaller debts.

By consolidating all payments into one simplifies life and makes it easier to make the monthly payments instead of paying multiple payments perhaps on different days.

Debt ConsolidationKept Simple

When someone has a lot of different types of debts like credit cards, lines of credit payments and loan payments it may be easier to apply for one larger loan to pay off multiple debts and only pay one monthly “consolidated”  payment. Consolidation loans can be issued by banks and finance companies.

How DoesDebt ConsolidationApply to You

If you have payments each month on different days that include: two credit card payments which are $100 each, overdraft payment of $50, line of credit payment of $300 and a separate loan payment of $700, you are paying $1250 a month on different days. This can get confusing. Instead, you have the option to apply for a larger loan to pay off all of those debts. This way instead of paying separate bills on different days you could potentially get a larger loan that pays off all of them for one monthly payment of $1000. Saving you $250 per month and making life easier by only having to remember one payment on a specific day.

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