After consolidating your debt, you may feel like your debt burden has lifted.
You may be considering a debt consolidation loan to help yourself get out of debt.
Often people will take out a home equity loan or a second mortgage as a way to consolidate their loans.
What's worse is that they have this new debt on top of the debt they've consolidated which compounds the debt problem.
This happens because consolidating debt often frees up available credit and many people cannot resist using it.
You make one monthly payment to the credit counseling agency and they pay your debt for you. Debt settlement is a negotiating strategy where you pay your creditors a fraction of the outstanding debt to satisfy the account.
Debt settlement might be a viable alternative if your accounts are charged-off or in collections.
The longer repayment period also means you'll also pay more interest on your debt. It's easy to run into a company who may push you to get a high interest rate loan that really costs more in the long run than paying your debts off on your own.
Other companies pocket your monthly payment instead of sending it to your creditors, leaving you with damaged credit.
It's easy to see that by reducing the interest you are paying, you are now able to repay your loan much faster than you would be able to repay all of your credit cards individually.
In this example, a debt consolidation loan is an excellent way to reduce the amount you are paying, and repay your debts faster.
That wouldn't happen if your unpaid debts remained on separate credit cards.