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Debt consolidation is the procedure of merging several debts (normally high interest) into just the one.
These types of debts are usually at astronomical interest rates (20%+), so there's good reason most people want to get them consolidated at a better rate.
This doesn't only decrease the expense of carrying the debts, but has the added benefit of letting you deal with fewer creditors and separate bills all the time.
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Consolidating your debt normally will work the best when consolidating what are called unsecured debts, things like medical bills and unsecured credit cards.
That's because secured loans will normally offer the lowest interest rates, bringing about the highest savings for the person(s) consolidating.
If you don't have any type of security to offer yourself that's not to say you won't be able to consolidate; just that you might not be able to get interest down
quite as low as if you did.
While the process of debt consolidation doesn't necessarily have to be managed by a company (or any third party for that matter), there are plenty of businesses that have
not only consolidation but complete debt elimination programs, and the majority of people choose to utilize one of them rather than taking on the stressful task alone.
If you are considering a do-it-yourself approach, be sure to do all your research and comparisons before proceeding.
If you're currently paying high interest on numerous accounts like medical bills, credit cards, or most any other types of un-secured debts; debt consolidation
with lowered interest rates will allow you to reduce your total payments while paying down the balances on your accounts more rapidly.
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Some kinds of high-interest bills that you could consolidate consist of:
- High-interest credit cards
- Old service bills (utilities, etc)
- Personal loans (unsecured)
- Collection agency debts
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- Student loans
- Department store credit cards
- Medical and legal bills
- Tax debts
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If you're getting involved with a debt management company, they may have particular debts that are allowed in their particular program and others that aren't,
but which ones in particular will depend on who you choose to deal with. Don't be afraid to talk with multiple companies, you might find different savings and policies at each.
Note:
Though select "debt consolidation" companies (note the quotes!) will lower your debt burden, if they do it by negotiating and reducing what you actually owe to your creditors
instead of refinancing the debt - it is in reality debt settlement - not consolidation. While they're commonly referred to as the same thing,
they are in fact entirely different processes, each with their own respective pros and cons.
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