Debt consolidation combines multiple debts (credit cards, personal loans, medical bills) into one loan with a single pay...
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Frequently Asked Questions
What types of debt can I consolidate?
Credit card balances, personal loans, medical debt, payday loans, student loans (private), and auto loans can be consolidated. Federal student loans have separate consolidation programs through the government.
How much can I save with consolidation?
If you consolidate 5 credit cards at 20% APR into a consolidation loan at 12% APR for 5 years, you save ~25-30% interest. Savings depend on your new rate, term, and how long you keep new debt off new cards.
Will consolidation hurt my credit score?
Temporarily — hard inquiry (-5-10 points), new account (-15-20 points). But consolidation lowers your credit utilization ratio (positive impact). Overall impact is 20-50 points for 6-12 months, then recovery as you make on-time payments.
What if my credit score is low?
Bad-credit consolidation loans are available from credit unions, online lenders, and peer-to-peer networks. Expect 18-36% APR. A co-signer or secured loan (backed by collateral) lowers your rate. Improve score first if possible.
Is debt consolidation the same as a debt management plan?
No — consolidation is a single loan you take out. Debt management plan is a negotiated repayment through a credit counselor (usually nonprofit) where creditors may lower rates/fees. DMP doesn't create a new loan; it restructures existing debt.