What are debt consolidation loans? Debt consolidation loans are loans where you use the proceeds to repay other debts. Debt consolidation loans come from banks, credit unions, finance companies, or private lenders.
Debt consolidation loans are often an alternative to other debt reduction strategies such as Credit Counseling, where a credit counselor contacts your creditors and makes payment arrangements on your behalf.
While credit counseling is a good strategy for some people, it can also damage your credit score.
In most cases debt consolidation loans actually improve your credit score, because you are lowering your monthly debt service payments, and repaying your debts in full.
There are two obvious reasons why you would want to get debt consolidation loans.
The first reason would be to combine many monthly payments into one monthly payments. If you have five credit cards, and the payments are due on the 5th, 10th, 22nd, 25th, and 30th of every month, it may get confusing as you try to remember what payments are due, and when.
With debt consolidation loans you only have one monthly payment. If you set up debt consolidation loans so that the payment is due on the day you get paid, your monthly bill paying and record keeping is greatly simplified.
The other reason that people get debt consolidation loans is to reduce the interest that they pay.
Credit cards carry high rates of interest. Loans from banks generally have much lower interest rates, because you only qualify for debt consolidation loans based on your credit.
By negotiating debt consolidation loans with the bank, you will probably get a significantly reduced interest rate. With a lower interest rate more of your payments go towards repaying principal, so you get out of debt faster.
Of course you only qualify for debt consolidation loans if you have an income to repay the loan.
Interest rates and terms vary, so it is important for you to shop around for the best rates on debt consolidation loans.
For more information, see our Debt Consolidation Loans Information Site Map, or use our search tool: