Debt Consolidation

Debt consolidation is one of the most common debt relief solutions in part because it is heavily advertised. With debt consolidation, you take out a consolidation loan to pay back your outstanding unsecured debt.

Then you only have to pay one monthly payment to pay back the consolidation loan. Consolidation loans typically have lower interest rates than your unsecured credit vehicles, so the monthly payments are usually lower than the sum total of the monthly payments for your outstanding unsecured debt.

The main problem with using debt consolidation to get out of debt problems is that the loan you take out must be secured by collateral.

Usually the collateral you put up is your home. In essence, you are trading a large sum of unsecured debt for a large sum of secured debt. That means that if you default on your consolidation loan or get behind on your payments, you could lose your home.

Additionally, with debt consolidation, you still have to pay back the entire amount you owe plus interest.  In many cases, you are also required to pay “points,” or percentage points on what you owe. These costs make your debt grow even bigger.

Comparatively, debt settlement reduces the amount you owe by negotiating down your debt. While it could take 5-10 years to pay back a debt consolidation loan, getting out of debt with debt settlement usually only takes 1-3 years.

Contact The Debt Store if you would like to learn more about how debt settlement can turn around your financial situation in a fraction of the time it would take to pay back a debt consolidation loan.

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