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Debt consolidation is a simple process that involves combining all non-secured debts, such as credit cards, medical bills and insurance, and tuition bills, into one monthly payment, which is substantially-lower than the combined payments a debtor is currently making.

Debt consolidation works by allowing the consumer (the debtor) to pay a fixed amount to the consolidation company; and in turn, the consolidation company gives them the authorization to make payments to the individual creditors on your behalf. For its part, the consolidation company negotiates lower interest rates; or sometimes, an interest rate of zero.

Creditors are usually willing to make such arrangements because they are more likely to receive payments on time from a debt relief organization than from an over-burdened consumer.

In what ways does debt consolidation help?

Debt consolidation helps a debtor in various ways, the basic ones being:

*Consolidate on monthly payments
*Management of debt
*Helps avoid future debt
*Get collection agencies off your back

Is it preferred over bankruptcy?

Yes, it is. Debt consolidation is an important step, which helps debtors avoid the much more serious step of declaring bankruptcy. In bankruptcy, your debts are canceled and your credit rating collapses completely; whereas debt consolidation is a much stable option, which gives you a better credit profile.

What are the various means of debt consolidation?

You have a few options when considering debt consolidation. You could hire a credit counselor to help negotiate a settlement with your creditors–often at a discount to the total amount due–or you can get a debt consolidation loan.

With a debt counseling company, you have the advantage of paying one bill each month for all your accounts. Debt relief organizations form relationships with thousands of creditors, giving them enough bargaining power to push creditors to forgive debt they normally would not.

With a debt consolidation loan, you will consolidate all of your unsecured debt into one single payment at a reduced interest rate. They will assist you in saving as much money as possible and will reduce your concerns and hassles.

Talbert Williams 1DebtFreedom.com All rights reserved

Talbert Williams offers debt consolidation, debt reduction, credit card debt referrals and advice. For more information, articles, news, tools and valuable resources on debt solutions, visit this site: http://www.1debtfreedom.com

According to wordtracker, 1819 searches are made per day for the word debt consolidation while debt settlement or debt relief makes only 300 search counts per day. Do you think that all these people who are searching for this word actually want to do debt consolidation? My experience says that most of them want a debt solution. People feel that debt consolidation is the most commonly accepted debt solution.

Is the word debt consolidation misinterpreted?

If we look at Debt Consolidation Care some new members feel debt consolidation is all about settling debts, some feel it is about getting counseling and some feel it is about managing the whole debt. Some even feel it is about doing everything together to settle debts. Consolidation is “The act of combining into an integral whole”, so debt consolidation should be “The act of combining all fragmented debts into an integral whole”. There are different ways of debt consolidation; however, the most common way of merging all the debts is by taking another loan.

Is debt consolidation different from debt consolidation loan?

Yes, it is. Even Wikipedia confuses between “debt consolidation” and “debt consolidation loan”. Debt consolidation loan is about taking a new loan to repay your entire fragmented loan. This can:-

• Make debts more manageable.
• Sometimes reduce the average interest rate paid on fragmented debts.
• Further reduce the average interest paid on fragmented debts if a bigger secured debt (like home equity loan, which will offer much lower interest rate) is used to pay unsecured debts.

Debt consolidation loan is a kind of debt consolidation. Sometimes taking a huge loan to repay your other loans is not advisable. In the absence of collateral attachments, it is seen that many reliable creditors refuse to offer a huge loan package at lower rates.

From a customer’s point of view, it is basically consolidating many monthly payments to one in a smarter way to save more and pay faster. This can be done even without taking a loan by using debt management program, which is again widely perceived as debt consolidation, as monthly payments are consolidated to one. Next section of the article will explain it further.

Why everything is perceived as debt consolidation?

What customer sees is one big monthly payment, which might be used by a law firm under different schemes to settle debts.

A law firm may use the money for an account basis suited solution, which may include:-

• Debt Settlement: One account may go for debt settlement, so the company may sometimes accumulate the monthly payments to offer a lump sum.
• Debt Consolidation Loan: Another account may be paid off using another loan.

So the perceived debt consolidation includes:-

• Consolidating monthly payments to one.
• Debt settlement.
• Debt negotiation with the creditors.
• Credit counseling.
• Debt consolidation loan.
• Debt management.
• Debt portfolio.
• Asset portfolio.
• Budgeting.

When nothing works out the law firm helps the customer file a suited bankruptcy. Next time when you hear “debt consolidation”, remember it can be a perceived word for a mix of debt solutions.

Janet Williams is a financial writer for www.debtconsolidationcare.com

Reason to Consolidate Your Debt #1 – Lower Your Interest Rates

One of the best things about debt consolidation is that more often than not, you will have the opportunity to lower your rates of interest. Instead of several different interest rates, you will obtain one interest rate, that is far lower than the many combined. Typically, when you consolidate your debt, you keep that same interest rate as well. It does not tend to fluctuate as your original debt interest rates may.

Reason to Consolidate Your Debt #2 – Lower Your Stress Levels

Debt can cause a great deal of various feelings, afflictions, and this can be on both a personal and mental level. When debt begins to take control of your life, instead of the other way around, many things can happen, such as:

• Depression
• Anger
• Stress
• Health Issues
• Arguments
• Problems At Work
• Lack of Concentration
• Sleeplessness

Debt consolidation allows you to focus more on your life than your debt.

Reason to Consolidate Your Debt #3 – Improve Your Life

When you consolidate your debt, you are taking the necessary steps to improve your life overall. You will find that your health is better, your relationship are better, you feel better, and best of all, your credit starts to improve, and more doors will open for you. When you are making an effort to get yourself out of debt, more people are willing to give you a chance. Therefore, you may be able to finally purchase that home you have been wanting or even find a better place to live, within your means of course.

Reason to Consolidate Your Debt #4 – One Payment

Perhaps the reason debt is so stressful and hard to manage is because of the various different payments that you must make each month. These payments are generally different dollar amounts, due on different days, and this alone can be enough to throw you for a loop. With debt consolidation, you have the opportunity to combine all of your payments into one easy to manage, easy to remember, and affordable payment.

One payment is so much easier to handle each month, than many payments. You will find that when you start making these payments on time, every month, life just because easier and more importantly stress-free.

Reason to Consolidate Your Debt #5 – Learn From Your Mistakes

Many debt consolidation programs offer a variety of other services as well, such as debt counseling, budgeting, and financial management. Once you have consolidated, it may be a wise decision to take advantage of these other services; they are typically free. You can then start on the road to a new, debt free, and financially stable lifestyle.

We all make mistakes, learning from them and knowing how to manage your finances properly, is the best way to ensure that you never become submersed in debt again. Again, debt is a part of every day life, knowing how to manage it and living within your means can be one very positive benefit of debt consolidation.

Destroy Debt has the advice and resources you need on debt consolidation and other financial topics.