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Debt Consolidation
Personal Finance
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Debt consolidation is when one takes multiple different loans or debts and
combines them into a single loan or debt. The idea is to take higher interest
rate loans, such as credit card debt, and to combine or consolidate these loans
into a single lower rate loan. This hopefully will lower the monthly payment and
allow the debtor to continue to pay bills without entering into bankruptcy.
Another described advantage of debt consolidation is to get a number of
unmanageable bills into a single monthly bill that is easier to manage and remember
to pay off.
The downside to debt consolidation is that it often allows the debtor to gain
more credit because they have payed off credit card bills. There is a temptation
to use those credit cards and more high interest rate debt may be built up. This
should be guarded against.
Always use a professional financial advisor to help manage your debt and investments.
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