I just wanted to know what consolidaton of debts is ? and if it helps in anyway ?

Answer 1

Its when you get all your debts together, such as car loan, bank loan, mortgage, credit cards, and instead of paying 100 to one, 200 to another and 500 to another each month, you pay them all off with one monthly payment, so, in theory, you save yourself money by paying back less each month (ie instead of paying 800 for 3 loans, your paying 500 for 1 loan)

It will take you longer to pay back, and long term loans usually have a cheaper rate of credit (just think rate on your credit card vs mortgage).

So, all great so far!! But remember, your likely to start building up your credits cards, you may want a newer car in a few years, and you may just find yourself back to where you started! So beware.

Also, people usually have to release equity in their homes to consolidate debt, (ie if you bought your house for 200k, and its now worth 250k you can get a loan for 50k) which is all very well and good in a growing housing market, but you'll find if you consolidate a lot you'll never pay your house off, and you could end up longer term paying larger mortgage repayments then people who bought property after you.

Answer 2

Consolidation of debt is usually where you take out a new loan say on your house and use the proceeds to pay off all the other smaller debts you have, thus "consolidating them" into one loan.

As for whether it helps, that depends on other factors such as the amount of the prior debts, the total monthly payments and what the cost of the new debt will be and that monthly payment.

Many times it makes matters worse for someone who does not understand it all.

First, often times it is very costly but that cost is hidden as it is "rolled into" the new loan.

Also, if the person who has consolidated still keeps the same older credit such as credit cards and then runs them up to the limits again, now they owe twice as much debt and have lost the equity in their home.

Although, this is the most common method of consolidation, there are also companies that will take all your debt and charge you one single monthly payment. It seems good except what they also "roll into" the cost of the program is their outrageous fees and then they negotiate to all your creditors to reduce payments.

This actually harms your credit and is considered by most lenders the same as a bankruptcy.

Your best plan of attack is to seek advice from a compentent financial planner who does not have a vested interest in selling you something. Get a review from several who do not charge an upfront fee to do this.

Read the book "The Richest Man in Babylon" for more help on what you can do yourself.

Good luck.

Answer 3

When you consolidate your bills, you get one loan to cover any and all debts. The ideal is to have a lower interest rate so you have only one payment to make so that when it's paid off, you are debt free. The problem is that many people continue to use their lines of credit or credit cards to continue the cycle of debts. If you are willing to consolidate it can work to your advantage to get out of debt but clip those credit cards. Don't cancel the credit cards unless you are charged an annual fee but rather leave your history in tact and keep your available cards in the event of an atual emergency. Make sure your interest rate on the consolidation is a fixed rate and that you pay on time and even pay more than the minimums to get out of debt faster. While doing that, start a savings account for an emergency fund with the money you save by consolidating all your loans into one. Shop around for a decent rate through your local banks or credit unions or consider checking the national rates at bankrate.com

Answer 4

consolidating debt is most often having a company collect your money and then pay the companys you are in debt too there are diffrent methods they use and most will contact the other companys and attempt to get you lower intrest rates and some companys will evan get them to forgive some of your debt,

however you have to be very careful while attempting these because some companys and banks will only lower the intrest rate for a limited time or they will jump them back up of you make a signel late paymeny to the debt consolidating company or sometimes evan if the company made a late payment some how,

of course some people think non profit companys are better for debt consolidation but that is debateable of course a non profit compny is supposidly not intrested in your money and they only want to help you but then again most non profit company only put a percantage of the profit back into the company or they dontae monay so they can maintain their legal non profit status after that they make profit,

also be careful of scams their are companys currentl;y facing law suits for taking peoples money and not paying the debt with it and also if your looking online their are companys that arent real and will only pretend to help their are many scams out there so you should go to the better buisness beruea web site and look up any company your thinking of letting handel your debt the websit can be reached at bbb.com

however many people do succesfuly use debt consolidation to help get them out of debt, just rember to pay on time

Answer 5

Consolidation is replacing multiply debts with one large debt. You don't actually reduce your debt at all. Most people that consolidate continue spending more than they earn. The result is recreating the original debts in addition to the consolidation loan. Unless you change your habits, consolidation does not help. If you do, you can pay of your existing debts without consolidating.

Answer 6

consolidation means bunching all your bills and debts together so you just have 1 payment each month to make. It helps you keeo track of your money so your credit rating is improved. Be careful of IVA's or bankrupcy. These make your credit worse. Go for a DMP (debt management plan) type this into google and you will get a load of websites who can help.
True organisations wont charge you a thing so shop around, definaltey a good idea if you arent very good with money!

Answer 7

If you consolidate your debts, you will end up with 1 monthly payment as opposed to several monthly payments to different creditors. Usually you can save money per month. However, whatever company you use to consolidate your debts, ask them how it will affect your credit score. Depending on how your debts are consolidated, it could negatively affect your score.

Answer 8

Put all your high interest debts together and make one payment at hopefully a much lower interest rate..Saves tons of interest but extends time to pay off bebt

Answer 9

it's basically taking all your money owed, letting another com-any pay all your bills in exchange for you paying them a monthly fee. watch out because these companies are scams.

www.bbb.org