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Financial Terms and Glossary

Debt Consolidation

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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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