What is a Consolidation Loan and how does it work?
A Consolidation Loan is designed to package all your repayments to creditors in to one single reduced payment, so instead of paying several credit providers and credit accounts you simply just pay all of them with one loan. When consolidating debt, your accounts are reduced into one single monthly payment at a fixed interest rate. Your monthly repayment of the settled accounts will be lower than you are currently paying. Unfortunately if you are over indebted or you are already experiencing money problems getting a consolidation loan should be the last thing on your mind, because creditors will not consider approving you if you have bad credit, there are other consolidation options that struggling consumers can look at.
What is Debt review or Debt Counselling?
This is when a debt counselor goes through your financial obligations with creditors and decides that you are over-indebted, and helps you by negotiating on your behalf with your credit providers to put all your debts into one affordable monthly installments and lower your interest rates. It is a paid service, but the cost will be factored into your new monthly installments.
This method will extend your repayment plan, Your assets will be protected, and your dependents’ essential expenses will also be covered. This method will also teach you accountability, because if you miss even one of your newly reduced monthly payments, the agreements your debt counselor made with your creditors will fall away and you can face legal action again with creditors.
During this process you won’t have access to new credit, but at the end you will receive a clearance certificate that will require the credit bureau to remove any information about the debt review, and your previous unpaid debts, from your record.
