Debt consolidation, also known as liability aggregation, helps you ease the financial pain and emotional toll that typically come with a high debt burden. Follow specific, baby steps to chart an effective course to consolidate your liabilities and gradually repair your credit.
A debt consolidation guide typically touches on total debt calculation, timing of consolidation, professional assistance during and after the consolidation process, and your responsibilities after consolidating debts.
What Is Debt Consolidation?
Debt consolidation means a company negotiates with your lenders to reduce your monthly interest and principal payments. This typically happens if you are saddled with debts and coping with economic tedium and relentless calls from collection agencies – sometimes as early at 8:00 a.m. and sometimes past 9:00 p.m.
The debt consolidation company talks to your creditors and shows them your paperwork, explains why you cannot pay and why it is in the lenders' interest to consolidate, and finally gets back to you with an answer. For example, say you owe a total of $32,000 on eight different credit cards. You lose your job or have to deal with another type of financial tumult, and you, therefore, cannot make the total required payment of $3,000 to all eight card companies.
A debt consolidation business can help you reduce your total indebtedness, say, from $32,000 to $16,000, and make you deal with a single creditor to whom you would send your payment every month. This is very helpful if you were in our hypothetical situation because you not only cut your total debt by 50%, you also would have peace of mind knowing that you are dealing with one creditor and that you have to remember only one payment date.