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Debt consolidation

Debt Consolidation

Let's start by simply looking up the meaning of the word: consolidate - To bring together, combine.
Combining your different balances into a single payment is the essential function of debt consolidation.
Debt consolidation
So instead of four (or more) checks to write each with different deadlines, a debt consolidator will coordinate with your creditors.  Then you make only a single payment each month!
Debt consolidation
Additionally, the debt consolidator can negotiate for lower interest rates and help in waiving unnecessary fees.
Debt consolidation
With debt consolidation, you pay the entire debt amount.  Any website or credit company that tells you otherwise is probably trying to steer you into debt settlement, which severely hurts your credit score.  Debt consolidation helps your credit score because you still pay back all you owe, and in fact are doing so quicker than if you left your debt in higher interest unconsolidated accounts.
Debt consolidation
So how do consolidation companies make money?  Well they keep a percentage of the payment for themselves. For example :
CURRENT :  You pay 24% annual interest on four different debts.
CONSOLIDATOR :  Negotiates the interest rate down to 18%, but charges you a little more.
YOUR FUTURE :  You pay 21% interest in a single payment for all your debts.
You save money, the consolidator makes money, and your creditor feels secure you will be repaying the entire amount you owe.

10/11/2006