Debt consolidation refers to replacing past loans with a new loan. The new loan will typically have a lower interest rate and, if you have more than one loan, debt consolidation can decrease it so you only have one loan to pay off.
When to Think About Debt Consolidation
If you find yourself with multiple loans, loans with high interest rates, or loans that are too much for you to afford, you may consider debt consolidation. This is something you may want to discuss with a financial adviser, such as Rescue One Financial. A financial adviser would be able to look at your income, current debt, and current loans to negotiate a new loan with your lenders.
How to Start the Process
Going about debt consolidation is fairly simple if you go through a financial adviser, however, you can try to do it on your own. To do this, you would need to go through your lenders and try to compromise on new loan agreements. If you have loans through several different lenders, this may be difficult to do. If this is the case, a professional debt consolidation company might be most beneficial to you. A debt consolidation company will have a financial adviser look at all of your finances and then allow you to pay back your loan through their company, most likely paying them in monthly installments. The company would then disperse the money to your lenders, eventually paying off your loans.
What Comes Next
Once you have a new loan, you must begin to pay it off. It completely replaces any former loans you may have had. The new loan will be different from your former loans, so be sure to pay attention to any slight changes in payment or interest rate.
If you have several loans from different lenders and are worried about paying all of them, debt consolidation may be the best option for you.