Can You Really Become Debt-Free with Debt Consolidation?

By Cortez Schwarten

Since the fall of the global economies, more people than ever have been finding themselves in insurmountable debt. As hard as it is for many of us to accept, our financial reality will never return to what it was a couple decades ago. In spite of this, many people may be able to take advantage of some opportunities to dig themselves out of the moneyless pit. While neither is a pretty choice, more people are considering the benefits, as well as risks, of pursuing either debt consolidation or filing for bankruptcy.

The debt consolidation process allows people the opportunity to take care of multiple instances of debt by paying a single financial institution. Rather than making separate payments to four or five different creditors, paying four or five different interest rates, a debt consolidation loan allows you to pull these different debts into one lower monthly payment, with one lower interest rate. Although it will usually take you longer to pay all the debts off, debt consolidation loans do tend to have considerably lower interest rates.

Consolidation loans will typically have a time period of a few to several years, depending on how much debt you have and the agreement you were able to obtain. While this may seem like a drag initially, ask yourself how long you have already been paying on your various debts; and how close are you to having them all paid off? While you may feel anxious to finally get that debt off your back, you should get a little peace of mind from your lower interest rate, in addition to not having multiple due dates and the threat of multiple late fees.

If all of this sounds a bit simple, that is because the debt consolidation process really is that simple. After researching and contacting a reputable financial institution, you will have to inform them of how much debt you now owe to however many creditors. Afterward, all of your creditors are contacted by the consolidation institution and they accordingly pay off all of your debts. Now that they are your only remaining creditor, you will have to make you monthly payments to your debt consolidation company.

Just because your monthly bills are down does not mean you should go back to being reckless with your spending. You would best help yourself by making a budget and sticking with it and altogether changing your spending habits, as this will build the financial discipline that will lead to financial independence.

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