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Debt Consolidation: Combining Your Debt

Debt consolidation is one of the most common consumer debt resolutions available. It can be a good solution for some; but as with all financial decisions, it's important to be 100% informed before committing to a debt consolidation program.

How does debt consolidation work?

Debt consolidation is the process of transferring unsecured debt into secured debt, or relocating debt from one place to another. In most cases, this involves transferring all your credit accounts into one line of credit. Other times, debt consolidation firms will advise you to refinance your home as collateral in order for you to make your creditor payments.

While this may not sound like such a bad idea, remember: This does not change the actual principle amount of the debt owed. You will pay 100% of the debt in due time, including the accruing interest. And if payments are not met, you may risk losing your home.

Debt consolidation can be suitable for consumers who have minimal debt, and are fully capable of making payments. Otherwise, we recommend an alternative solution.

Debt Consolidation vs. Debt Settlement

Unlike debt consolidation, debt settlement will actually reduce the debt you are required to pay your creditors. Federal Debt Reliefs can negotiate the amount you owe on each of your creditor accounts, significantly minimizing your balance on each one. We encourage you to read more on our debt settlement page.

 

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