Debt Consolidation Q&A
Here are some frequently asked questions that you may have about debt consolidation, along with answers to these questions.
Q: What is debt consolidation?
A: "Debt consolidation" means taking out one loan to pay off other debts, like credit cards, medical bills, department store charge accounts, and taxes, to name a few.
Q: Why should I consolidate my debt?
A: You may want to consolidate your debt to:
· Lower your interest rate.
· Pay off your debts sooner.
· Lower your monthly payments.
· Improve your credit score and overall financial situation.
· Have only one payment due each month, instead of two or more.
· If you borrow against your home equity, have the possibility of deducting the interest from your taxes.
Q: How much can I save by consolidating my debt?
A: How much money debt consolidation might be able to help you save depends on:
· Current interest rates
· Your credit score
· The term of your debt consolidation loan
· The type of debt consolidation loan you choose
· Any fees involved
· Whether you can deduct the interest from your taxes and, if so, how much
Our Debt Consolidation Calculator can also help you find out how much money debt consolidation might save you.
Q: Can debt consolidation improve my credit score?
A: Debt consolidation may be able to help you improve your credit score, as well as your overall financial situation. Having just one bill with one monthly payment, along with a fixed interest rate, may help you streamline your finances, free up extra money each month to help you meet your financial goals, and plan for your financial future.
Q: What debt consolidation options are available?
A: There are three basic ways to consolidate your debt:
· Home Equity Loan: You borrow money against your home equity, or the value of your home minus what you owe on any mortgage(s) you have.
· Cash out Mortgage Refinancing: You take out another mortgage on your home to pay off your current mortgage, as well as some extra money.
· Personal Loan: You borrow money based on your promise to repay.
Our Debt Consolidation Decision Helper offers more details about these options.
Q: How do I compare debt consolidation options?
A: When comparing debt consolidation options, there are other things to think about besides your monthly payment or interest rate. For example, a loan that offers you the lowest interest rate or lowest monthly payment may not have the lowest fees. On the other hand, a loan with low fees or no fees may have a higher interest rate or monthly payment.
Q: What are some other things to think about when consolidating your debt?
A: Make sure you get everything in writing, read everything carefully before you sign it, ask legal and financial experts to help you understand anything that isn't clear, and watch out for anything that's "too good to be true."
Q: Where can I learn more about debt consolidation?
A: Visit our Debt Consolidation page to find out more about consolidating your debt.
Related Articles
Debt Consolidation Decision Helper
How Debt Consolidation May Improve Your Credit
Debt Consolidation Checklist
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert before you take action. Contact us for more information.
