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What Can Debt Consolidation Do for You?

By Gabby Hyman
Mortgage Credit Problems Columnist


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Consider the pressure of owing on multiple loans that exceed your income, and creditors are on your tail. Say that your debts have piled up, investments have gone bad, you took a pay cut, the car died, your kids lost their scholarships, or other unexpected financial crises showed up on your doorstep -- or all of these happened at once. Debt consolidation loans can provide immediate, temporary relief.

Relief is "temporary", because the total amount you owe simply won't vanish. You'll still owe the money. But debt consolidation and debt consolidation home loan counselors may be able to assemble a strategy that rolls your debts into a single payment plan, typically with a lower interest rate than you're paying today. In rare cases, creditors may even forgive part of the debt, happy to receive at least payments on the principle.

What Should You Ask Your Debt Consolidation Counselor?

First, compare lenders. Not all debt consolidation or debt consolidation home loan packages are the same. The following up-front questions can spare you headaches:
  • What are the actual loan counseling costs? Few and none. Beware of large commission fees that exceed relatively inexpensive processing fees.
  • What can you expect for a single payment on the loan? If the monthly payment on the rolled-up debt under the consolidation loan exceeds your current burden, you'd have more trouble meeting ends than you already do! You need to pay less, remember. And perhaps you need to pay less over a longer period of time.
  • What kind of interest rate can you expect? Depending on your credit rating, you should expect to pay a lower rate than you do now on credit cards and other outstanding loans. If you have poor credit, you might consider a secured debt consolidation home loan that will keep the rates down.
There are also fixed-rate debt consolidation loans that can hold the monthly payment within your means. Shop around!

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