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How Does Debt Consolidation Work?


Debt consolidation is a tried-and-true debt repayment solution that can help you pay your debt back and get your financial life back in order and back on track.

If you’re like most visitors to the website, this may be your first encounter with debt consolidation programs. And that means you’re probably wondering - how does debt consolidation work, anyway? Here’s what you should know.

How Debt Consolidation Works

Owing money is just one part of being in debt. Because our founder was in debt himself, we know there’s a huge psychological impact as well. Every month, trying to balance what’s coming in with what’s going out causes significant amounts of stress. You might get bogged down with feelings of shame, guilt, fear, anger and even failure. If you have lots of debt, chances are you deal with those feelings all month long, especially when another bill comes due.

Debt consolidation can help alleviate all of that stress and negative feelings.

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What does consolidating your debt mean? Debt consolidation is simply a method of reducing your monthly payments by combining all your outstanding balances into one easy monthly payment - sometimes reducing your outstanding balances or your interest rates in the process. That means:

  1. You only need to deal with one monthly payment instead of multiple payments throughout the month.
  2. Your payment will be the same every month, so you can plan your budget more effectively.
  3. Your payment may be lower, which means you could be freeing up more money each month, allowing you to build a cushion and breathe easier about your finances.
  4. Your interest rate could be lower than all or some of your loans, so more of your money goes toward paying down principal.
  5. Your payments will be up to date, so you won’t have creditors calling you day in and day out - and you won’t have a mailbox full of collection letters.

Debt Consolidation Options

When it comes to consolidating your debt, you have two primary options:

Cost of Debt Consolidation

Your cost for debt consolidation may vary based on your state’s regulations as well as the number of creditors you place on the plan. Basically, it depends on what your unique situation is. The easiest way to find out exactly how much enrolling in a debt consolidation plan will cost you is to call us and speak to an expert.

Talk with someone right away and lets get you out of debt

Call 1-866-410-5323 & Select Option 2.

Learn which plan is right for you.

It takes a while to build up debt - and similarly, you can't expect your debt to go away overnight. Simply knowing the answer to how does debt consolidation work is not enough, you have to take steps to get your debt under control - and to get your financial life back on track. The most important thing you can do is to get started now. The debt repayment experts at CareOne are ready to assess your debts and help you choose the best repayment plan for your needs. Call CareOne today at 1-866-735-7559 or use our online form and request an evaluation. Take control of your financial future - and say goodbye to stress and fear.

  • Debt management plans (DMPs) are usually the first choice for people looking to reduce their monthly debt payments. A DMP works like this: Your debt counselor works with your creditors to reduce your monthly payments, your interest rates, late fees and other penalties, then combines the resulting payments into one single payment that you make each month. In turn, your counselor divides the payment into individual payments that are disbursed to each of your creditors. All you have to think about is that one single payment; your DMP debt counselor does the rest.
  • Debt settlement plans (DSPs) are the second option. In a DSP, your debt counselor works with your creditors to have your overall debt reduced. You make a single monthly payment to an escrow (or holding) account while your counselor negotiates with your creditors. Once the negotiations are complete, your counselor uses the funds from your account to pay off your accounts. Under a DSP, you wind up paying a percentage of what you owe instead of repaying the whole amount. That may sound great, but a DSP does take a toll on your credit rating since you wind up paying just a portion of your actual debts. Still, a DSP can be a great alternative for those who can’t afford the payments under a DMP - and it’s also a great way to avoid bankruptcy.

If you liked this you may also like:

  • How and Where to Get Debt Consolidation Loans for Bad Credit

    If you’re struggling with debt – as many consumers are – you may be looking for a way to pay off your bills and get back on track financially. Debt consolidation loans for bad credit profiles are one way to get out of debt, but you may be wondering where to look if you’ve been turned down by your bank or credit union. Before you go down the wrong road, take some time to realize there are choices for you, regardless of your credit history and financial situation

  • Mississippi

  • Minnesota

  • Michigan

  • Massachusetts

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