Debt Consolidation means that the person in debt combines all their existing debts into a single loan called a Debt Consolidation loan.
A debt consolidation loan does not reduce the total amount of money you owe. It simply allows you to pay off all your credit cards and other debts. You are then left with one loan – your debt consolidation loan.
With a debt consolidation loan you make one single payment each month.
The interest rate on a debt consolidation loan is likely to be much less than the interest rates charged on credit cards.
Why have a debt consolidation loan?
The interest rate on a credit card debt will usually be much higher than the interest rate on a debt consolidation loan. Therefore a debt consolidation loan lets you pay off what you owe instead of paying endless interest charges.
A single monthly payment is much more manageable than paying off several different credit cards etc. With a single loan it is much easier to work out how much interest you are paying.
Managing a single loan is likely to be less stressful than responding to several monthly credit card bills. Once you have paid off all your credit cards and other debts you will not receive letters demanding payment or letters threatening legal action etc.
MoneySolve can advise you on whether a debt consolidation loan is right for you. If it is we will arrange one for you. If not we we will offer you an ethical alternative.