Debt Consolidation

Debt Consolidation

Debt Consolidation

Debt consolidation means taking out a large loan to pay out a number of loans, consumer debts, bills. Doing this brings all these debts together into one combined loan which you pay off with a lower rate of interest. With this, the borrower finds it easy to pay off his terms with lower monthly payments than before. As we are combining all the loans together into one, this refers to “consolidating” them. That’s why it is termed as debt consolidation loan.

Technically it is impossible to combine all loans and merge them together. Every loan has its own repayment terms and rate of interest. Each loan has an agreement where you pay it back in set payments over a period of time. So to consolidate debts, you actually get a larger new loan and you use the money from it to pay off the loans you wish to combine. Debt consolidation loans are used by people to combine small loans, bills, credit card balances, overdraft balances and short term payday loans.

debt consolidation loan

Finance Companies and Banks issues Debt consolidation loans. There are additionally some debt repayment programs that can help to consolidate all the debt payment in a single payment for individuals who are finding it difficult to pay off their debts.

Reasons Why People Go For Debt Consolidation Loans

Reasons to get a debt consolidation loan may vary from people to people.

Some of the reasons can be:

  • It eases our finances by minimizing our many debts payment into one, which is easier to track than a number of loans that we had.
  • It helps by lowering the rate of interest. As all of your smaller loans are combined into one large loan, the rate of interest with which you make repayments is also reduced.
  • It makes our life much simpler by reducing the monthly repayment amount, this is possible only if you get a lower rate of interest on the consolidated loan
  • Debt consolidation loans help you to maintain a decent credit score, it helps your credit score positively.
  • You can pay your debts faster if you manage to get a low-interest rate on your debt. Getting a lower rate of interest depends upon your credit history.


You should go for a debt consolidation loan only if you are confident enough to make the repayments. If failing to do so it might harm your credit history. Also, which might have a negative effect in the future when you apply for a loan.


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