Frequently Asked Questions

The debt management world is very large and diverse, with a variety of financial tools and methods available to assist consumers in getting out of debt. But the process can be confusing, particularly when the stresses of dealing with debt can impact nearly every part of daily life. Debt consolidation loans are a popular way to receive total debt help and eventually return to financial freedom. Below are answers to some of the most commonly asked questions about debt consolidation loans.

What is debt consolidation?

Debt consolidation is the process of transforming a group of debts - such as credit cards, auto loans, student loans or other debts - into a single loan. Consumers consider this as an option for reducing their debt because it provides the convenience of just one monthly payment. Often, this can be preferable to making several payments each month to multiple lenders. Consumers must apply for debt consolidation loans and factors such as employment status, income and credit rating could affect whether they are approved for a consolidation loan or the type of consolidation loan they receive.

Do I have to consolidate my debts?

No. Choosing debt consolidation as a method of eliminating your debt is a decision that you must make on your own. Consumers have several types of tools they can use to get out of debt, such as a debt management service or credit counseling. Debt consolidation loans are typically selected because consumers need a tool that they can easily manage within their income - consolidation loans create just one monthly payment to reduce debts. Make sure to review any consolidation offers you receive and ask questions before agreeing to the terms and conditions. You may want to receive a series of competitive quotes from several consolidators to determine which program is most advantageous for your personal financial situation.

Will debt consolidation eliminate all my debts?

Not necessarily. Debts such as your mortgage or home equity loan are not likely to be considered for your debt consolidation. Most consumers use consolidation loans for debts such as credit cards, auto loans or student loans. You can work directly with your consolidator of choice to determine the most advantageous consolidation loan program that will help you eliminate your debt within your current means and get back on track financially.

My debt has ruined my credit. Am I scarred for life?

Not at all. The fact that you're aware of your current credit situation and are preparing to get out of debt is a good sign that better days are ahead for you. Consumers can repair their credit ratings, but it will take several years. Defaulted accounts and other delinquencies stay on record for seven years, and it can take time to gradually improve your credit score. Be sure to pay all your bills on time every month, and work to keep the balances low on your revolving debts such as credit cards. These smart money management habits will reflect well on your credit score in the future. Right now, the most important thing to do is get out of debt and stay ahead of your bills. If you want to know more, read more information about how your credit affects you.