What Is Debt Consolidation?

More and more people are burdened by debts. In general, people are facing financial setbacks due to excessive expenses. In the United States and in some other countries, when someone is trapped in debt, it usually implies their use of credit has gotten out of control.

It starts when a person chooses to use credit cards to pay for food, gas and other necessities irresponsibly. Interest piles up and things snowball out of control. Your debt can then literally start to take on a life of its own like a whirling tornado gaining more power as it accumulates more debt.

Debt consolidation is a better option than filing for bankruptcy. It involves making a loan to pay other debts. What’s good about it is that it generally offers lower interest rates compared to normal loans.

Debt consolidation loans can be secured (protected with various collateral such as your valuable assets) or they can be unsecured. The primary purpose of debt consolidation is to make things easier for you in paying your monthly bills.

Instead of paying your debts separately, you can pay them all at once. This can actually reduce the total monthly payments you have, as you will settle all your debts in one single payment and will pay one interest rate for all your debts.

Just like other debt relief options, not all debt consolidation programs are good. You need to find a good company that offers debt consolidation programs. There are several agencies that claim they have the best service, yet most of them are not really concerned about your financial condition, rather their main goal is to make a fat commission.

What then is the best way to find the finest companies? A local reliable credit company can be a helpful source of information. They can recommend a good list of companies for you to choose from. You can positively consider the list, as it would be far-fetched for a reliable credit company to jeopardize their credibility just for a fraudulent recommendation.

You may also look for several companies that offer debt help programs online or by searching through phone directories. Evaluate your prospected companies. Weigh the quality of their services to the amount that they charge their clients. Be keen. Be decisive.

An important thing to consider when choosing a debt relief company is reputation. Make the companies you’re considering have good reviews from numerous people who have experienced their services.

You also need to know if these companies will allow you to be involved in the decision making process that will solve your financial crisis. Some companies take control over the whole decision making process, leaving you powerless over your finances.

If you are planning to consolidate your debts, you need to calculate your expenses first. This way you will know if a debt consolidation program is actually the right solution for your debt problems.

You need to determine how much you are going to pay for the consolidators who will be helping you , and the total amount you will be paying to your creditors.

Debt consolidation is a manifestation that one cannot manage his or her finances. You should closely monitor all the accounts that are consolidated to make sure that payments are being made as agreed upon and that your credit profile is improving.

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Damien Leleu

Debt consolidation clearly is not for everyone, if you are a person who can’t manage your finances all you will do is to change your creditor, maybe with a lower intrest rate but still. It feels this kind of options are meant for persons who had a bad streak but now he or she is ready to come out of the hole and come clear of debt. Discipline and measurement are necesary to make this option efficient. The idea is to come out of your debt not to make it bigger.


It sounds good superficially but you would have to calculate all the expenses, charges, and interest payments of the consolidation loan. If that is more than the charges of all your debts put together than you’re better off not using the consolidated loan in the first place. Consolidated loan companies do not offer their services as a charitable function. Caveat emptor !

Manda Lynne

I should really look into financial advice. We began using credit for silly expenses like gas and food, and it didn’t take long for it to accumulate and become intimidating. Mine and my partners dept are spiralling out of control. Dept consolidation would likely be beneficial for us and our family. It would alleviate all the stress of Multiple dept payments a month.


I do not agree with the view that debt consolidation is a better option than filing for bankruptcy. To paraphrase the views of Warren Buffett, I would say that all these options are weapons of mass destruction. Prevention is better than cure!

Peter Sangio

I think this is the best debt relief options available so far, managing and checking debts with numerous company is a nightmare…

Gaurav Joshi

Yes!Everybody wants comfort and luxury,pleasure and a lavish life,but on what cost?Living in the present does not imply forgetting the future.Plan your today for a better tomorrow.


Debt consolidation has been all too familiar. Caught in a vicious circle of debt we had to figure a way out of the mess. And it helped. Instead of being troubled by 5 different debts all we had to worry about was just 1. But a personal advice… Be modest and wise in your expenditures until you break free from your debt completely. It is a debt after all!

Kulin Shah

Debt Consolidation can be a boon or a ban according to how a person acts on his or her finances. Ih a person uses this tool wisely, they can be easily rid of debt and be financially free.

Risk Manager

It is best if we pay our debts on time, however, circumstances can lead us to non payments. This is not the end of the world, we must remember. Good thing we have options on how to resolve issues in debts when it seems already impossible to handle it. I agree with what this article points out. Debt consolidation is better than filing for bankruptcy. They may both affect our credit rating however there is a saving face in debt consolidation.

Yasser Zubaidi

“It involves making a loan to pay other debts. What’s good about it is that it generally offers lower interest rates compared to normal loans.”
Although it seems like a good alternative to be implemented in resolving those mountains of debts, nevertheless the debts wouldn’t be resolved immediately because at the end of the day, another fattened debt is still pending due to the accumulating interests. It is better to spend on a professional financial consultant or do your OTs more frequently.


Agree to all these. Debt consolidation might be awesome for those people who’s in a deep debt and need to pay less each month rather than what they’re currently paying. But the key is to change the personal debt habit after applying for one, though, since debt consolidation is generally just helping you to get more breathing room. Great article nonetheless. Thanks!

Therese Marie Y. Baguio

Debt consolidation is one of the best ways to settle your debts but it can also be risky in terms of finding the best credit company. I agree that you have to find a credit company that offers genuine solution to your debts and offer flexible terms for monthly loan payment.

Hoping to be financially savvy

Interesting article. This is the first time I’ve heard of debt consolidation. I used to think that once you are in that much debt, it’s game over and you would have to file for bankruptcy for sure. Debt consolidation could be a better way to resolve debts for some as the interest rates are levelled for all debts.

Kimberly Flores

Debt consolidation can actually be prevented if people are responsible enough to manage their financial resources, and when a person encounters debt, that means the person is not well-trusted with money. I know that temptation is very hard to overcome but learning how to control expenditures is one way to avoid debt and to avert from debt consolidation loans, which could only lead to further embarrassment from spending too much.

Juan Paredes

I have experienced debt myself in life, its a terrible feeling to know that you owe more than what you earn. The best option is to save money and make pruchases based on the income that you have available and not based on a credit limit that a credit card can give you.


Debt is not really that hard to pay if you are just going to be responsible with your finances. Good thing is that there are companies now that can help us out with our finance troubles. Debt consolidation makes the paying less stressful as you are just going to transact with one company. But, just be cautious to just the credit company which will help you out because you do not want to worsen your situation.

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