Debt Consolidation - How to Consolidate Your Debts - Information

Welcome to the Debt consolidation page. We are here to educate and provide you with consolidation programs that are offered by well known debt consolidation companies.

Debt consolidation, when and if done properly, can allow you to simplify your bookkeeping and bill payments and to potentially pay off your loans at a lower interest rate. But it sometimes requires offering items you own as collateral in case you can’t pay it off and can lead to pushing you even further into debt. Take good care when you plan your debt consolidation - the goal is to reduce your bill clutter AND get better rates. Keep reading...

Three Types of Debt Consolidation

There are several types of debt consolidation offers. The first comes from a finance company, which will offer to loan you money to pay off your bills and owe just one creditor (them). The problem here is that finance companies sometimes charge sky-high interest rates. That means the finance company could have an incentive to stretch out your payments to increase the interest. Worse yet, many creditors consider finance companies the lender of last resort. So you can actually damage your credit rating by using a finance company even if you’re paying on time.

The second type of debt consolidation loan is offered by a bill-paying service, which can be even more dangerous. These services charge you a fee perhaps 10% of your debt to pay your bills each month. They simply act as a bookkeeping service. Bill-paying services do not consolidate your debt. Some of them even neglect to pay your bills on time.

The third type of debt consolidation is a legitimate lender looking to increase its capital base of trustworthy borrowers. This is the type of lender you are looking for. The key here is to be a TRUSTWORTHY borrower, regardless of the size of the consolidation loan. Even if you are consolidating 4 credit cards with $25,000 or 2 credit cards with $750, your goal should be to set an excellent track record with that lender. And there is an easy way to do this...

The best way to establish a good track record with a legitimate consolidator is to pre-pay your loans ahead of time. You don't need to do this by much - even $10 or $20 will work well. By doing this, you build up a good history with that lender where you are pre-paying the loan slightly but not paying it off entirely. This is very attractive to consolidation lenders as it means your risk profile is getting better all the time, and they have an incentive to lend you more (read "consolidate more credit cards for you"). The goal should be to move all or most of your other credit card balances to the same reputable debt consolidator over time. This is not only an excellent way to recouperate your credit (if it's bad) but also to reduce your loan balances steadily and eliminate all the complications, fees, and rate changes you are currently flooded with among multiple cards.