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Debt Relief – Insolvency – Bankruptcy Information » Debt Consolidation and Refinancing » does all debt debt consolidation involve a loan?

does all debt debt consolidation involve a loan?

Ive been looking into debt consolidation and, is there a difference between debt consolidation, and a debt consolidation loan? and if so what?

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4 Responses to "does all debt debt consolidation involve a loan?"

  1. quizzard123 says:
    No, you consolidate your debt by going from a bunch of smaller loans (your current debt) to one bigger loan, hopefully at a lower rate of interest. You take out the big loan specifically to pay off the smaller ones (especially credit cards, which have huge interest rates)
  2. CatDad says:
    Real debt consolidation involves getting a loan to pay off all your other debts so that you’ll have just one monthly payment.

    Debt consolidation also refers to a tactic called “debt settlement.” Stay away from any “debt consolidation” company that promises to cut your debt and payments in half through debt settlement….This is a risky tactic of deliberately ceasing all payments to creditors and forcing your accounts into default to attempt settlements. You pay a monthly fee to a debt consolidator….this entire fee goes towards building a settlement account and to the consolidator’s fees to “settle” your accounts in the future. Your credit card companies will deliberately not be paid so that all the accounts will default/charge-off so that they can attempt settlements at around 50%. If you are current on your accounts, this process will ruin your credit rating for sure. Debt settlement is like a roll off the dice with your finances…You can never predict how your creditors will respond to the deliberate defaulting of your accounts…they might settle at 50%…or they might serve you a summons, take you to court…and if they win, you could be looking at wage garnishment.

    Many people who sign up with “debt consolidation” firms incorrectly assume that they have the power to force your creditors to accept settlements…they don’t. Your creditors have the right to refuse settlements and take you to court.

  3. Whitley says:
    No it does not always involve a loan. Debt consolidation is a phrase known for taking all of one’s debt and consolidating them into one payment. You can consolidate your debt through debt consolidation loans, by utilizing your home’s equity or by entering a debt repayment plan through credit counseling.

    Of the three, the most difficult to understand is debt consolidation through a debt repayment plan. This is where you would contact a credit counseling agency and they will see if you qualify for an interest rate reduction through your current lenders. If you do qualify, you would close the accounts you want to include in the debt consolidation and make one set payment through a credit counseling agency. The credit counseling agency, in turn, would make the payments to your creditors on your behalf at the new, reduced interest rates. If your interest rates are under 10%, a debt repayment plan through credit counseling may not offer much benefit. However, if your interest rates are over 20%, you may be able to get a significant reduction in your interest rates.

    Another benefit with a debt repayment plan is that you will make one set payment throughout the term of the program. This will help you by having more of your payment apply to the principle than if you were to make the minimum payment required by creditors each month. Debt consolidation is not for everyone and you should consult with a certified credit counselor to determine if debt consolidation is right for you.

  4. Mia Jacob says:
    Debt consolidation loans consolidates multiple lines into one new loan or debt consolidation program – it typically involves a debt consolidation loan, but could also be referred to as a credit counseling program or other forms of debt resolution that do not involve a new loan. It is important that you know what your options are and what your goals are before choosing a debt consolidation program or company.

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