Debt Consolidation is the act of using one loan to pay off numerous other loans. Even though these often get confused, Debt Consolidation is NOT the same as Debt Settlement (attempting to settle with creditors for less than you owe) or Debt Management/Credit Counseling (working with a non-profit company to work out a budget, repayment plan, lower interest rate, etc). It is simply exactly what the name states: “consolidating” several debts into one.
With debt consolidation, you are attempting to put all your debts together into one all-encompassing monthly payment. The idea behind it is that if you can consolidate all of your debts into just one that it will 1) be easier to manage, 2) be a lower payment than all of your current monthly payments combined, and 3) hopefully have a lower interest rate.
Debt Consolidation In A Nutshell:
Debt Consolidation is taking out one larger loan to pay off all of your current debts, resulting in one lower monthly payment.
