What is debt consolidation?

The definition of debt consolidation is to consolidate all of your payments into one payment. Most every credit card debt relief program does this. Typically when people think of debt consolidation they are actually thinking of what is known as a debt consolidation loan.

With this you lump all of your debts into a new loan at a lower interest rate. One of the most common forms of debt consolidation loan is a home equity loan or mortgage refinance loan. With this you are taking all of your unsecured debts and turning them into a new secured debt.

The trouble can come when it becomes difficult to maintain that loan payment.  If you default on a secured loan such as a home equity loan, then they have the right to repossess the items securing the loan. In a home equity loan that would mean you might end up losing your home.

If you choose to borrow your way out of debt ensure that you are looking at the distant future when planning this out. Consider the amount you are paying for the entire life of the loan and see if that in deed will save you or will it end up costing you. Also make sure that you have a backup plan in place should you come to a point where you end up defaulting on that new loan.

We would suggest that you speak to a debt analyst who can help you determine if this form of debt consolidation is truly in your best interest or if you should explore other debt relief programs.

The review is quick and easy and does not cost you a penny. Simply fill out the form to the left to find out which option is best for you.