Debt consolidation is one strategy for resolving the problem of unmanageable debt, which typically involves credit card debt at high interest rates.
Debt consolidation involves securing one loan, at a manageable interest rate, that is used to pay off all other debt. It therefore simplifies the paperwork and tends to reduce overall monthly payments. One source of debt consolidation is a home equity loan, but personal loans, auto-refinance loans, and specialized debt-consolidation services are all options for consolidating debt.
Although debt consolidation can help borrowers get back on their feet, if the borrower doesn't control his or her spending prior to and throughout the debt consolidation process, the problem is likely to continue and worsen.
Related Fool Articles
Recent Mentions on Fool.com
- What ConAgra Inc.'s Spinoff Will Mean for Investors
- Writedowns or Operating Results? Making Sense of Seadrill Ltd Earnings
- 10 Infamous "Last Words" of Personal Finance
- 5 Things Apache Corporation's CEO Wants You to Know
- Why You Shouldn't Consolidate Your Student Loans
- Why Chesapeake Energy, Tenet Healthcare, and JinkoSolar Slumped Today