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FAQs about debt consolidation loans

It's funny, the minute anyone brings up banking or loans a bit of confusion just naturally sets in. Banking terms, percentages, interest rates and due dates naturally cause panic. Learn the answers to simple questions about debt consolidation loans and discover if they could be the help you have been searching for.

What is the definition of debt consolidation?

Generally, debt consolidation is when you make arrangement to combine at least two or more of your debts into one easy to make monthly payment.

How would I benefit from consolidating debts?

(1) You will save time and paperwork by only making one payment per month instead of several. (2) There is a good chance you could drastically reduce the amount of interest you are paying on multiple loans. (3) If you can acquire a new consolidation loan with lower interest rates, you should be able to pay on the principal faster and pay off the loan quicker.

Will consolidating my debt end all my worries?

If you take advantage of debt consolidation and use it as a tool to wisely pay off your debt a step at a time, you definitely should benefit. However, if you are not able to change your attitude about charging credit and continue or increase your charging habits, you could end up in worse trouble.

Can consolidating debt help my credit score?

It certainly is possible to have a positive effect on credit scores by paying down debt. When more money is applied to the principle of a charge card or loan, your credit to debt ratio is lowered and this in turn has a positive influence on your credit score.

Why do I care about high interest rates and bill consolidation?

Typically when you charge something, you owe the charge card company for the amount of that item. When you do not pay for the item in its entirety by the end of the grace period you begin accruing interest on top of the original cost of the product you charged. The higher the interest rate, the deeper into debt you become.

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