The problem with these advertising spots is that they only talk about the benefits. When you consolidate your debt, you are taking multiple payments and putting them into one. Along with this, you no longer have to decide who should get paid first and how much you should send each creditor.2. How much money are you paying out in interest every month?Unfortunately, this has tricked many people into consolidation when it was not the best decision for them. If you have a lot of debt, spread across several loans and/or credit cards, you may be paying hundreds or maybe even thousands in finance charges.The reason this can be helpful to people with a lot of debt is that it can solve three of the worst problems you face: 1) High interest rates Some types of debt (particularly credit cards) can have extremely high interest rates – up to 25% or more.If you’re in that kind of situation, there’s a good chance your debt will grow faster than you can pay it off.But of course, before you can decide if it’s the right choice you have to answer some important questions.One of the most important is, “does debt consolidation hurt your credit score?
However, the fact is, debt consolidation can improve or hurt your credit score.
When you’re ready to get out of debt, sometimes it’s hard to know which path you should take.
For some people, debt consolidation will be the best option because it can allow you to group all your debt together, thereby making it easier to manage your debt – and in some cases lowering your monthly payment and interest rate at the same time (see our article on how debt consolidation works).
” To answer that, you need to understand how credit reports and credit scores work.
If you’re not familiar with the process, here’s a very brief explanation: Your credit report contains information about all the credit accounts you’ve ever had, including mortgages, auto loans, credit cards, student loans, etc.