Make Debt Consolidation Program Your Companion in Debt Problem

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Debt Consolidation Programs


  • Possible reduced fees on loan and low-interest rate
  • Pays all debt
  • Affordable monthly payments
  • Free debt counseling and credit
  • Clears debt in five years or less
  • Few qualifications needed


  • Can’t consolidate secured debts
  • You can save money by paying off debts less than $1,000 on your own

Debts That Can Be Consolidated Using Debt Consolidation Programs

Debt consolidation programs are meant to help you with your unsecured debts. Unsecured debts are debts that are not secured by collateral, that is, a car or a house. The common unsecured debt resolved through the program is credit card debt.

However, you can address all types of unsecured debt through debt consolidation. Unsecured debts that can be resolved through the program include debt in collections, past medical bills, payday or personal loans, and repossessions.

Car loans, mortgages, and home equity lines of credits are secured debts, and as such, can’t be addressed in the debt consolidation programs.

Will Debt Consolidation Programs Hurt Your Credit Score?

Participating in the program to consolidate your debt will not affect your credit score. But your creditors may make a short note on your credit report. The idea behind it is that, if you attempt to repay your debt, it will inform other creditors and stop them from issuing new accounts, loans, or lines of credit that may reduce your efforts.  You must remove this notation if you complete your program.

A Debt Consolidation Program Does Not Mean Debt Elimination

Debt consolidation programs do not eliminate your debt. You are only restructuring your debt. Most of the time, when people consolidate their debts, they go into debt again. Why? They don’t have a good plan to spend less.

This is primarily due to not developing good spending habits to help stay out of debt. So, the chances of going back into debt are very big. The debt consolidation program is good, but if you pay off your debt, the rest is up to you to manage your wealth.

 Benefits and Downsides of Debt Consolidation Programs

The whole idea of the program is to fix your debt into one monthly payment instead of having many bills to pay.

The interest rate on the one payment is lower compared to your previous payments. A lower payment means you will pay your debts faster. Also, if you have bad credit loans, you’ll get a reasonable interest rate from the debt consolidation program than the debt consolidation loan.

Another essential advantage is that the program does not need your credit score to determine your eligibility. There’s no requirement involved in getting a new loan. So you still qualify if you’ve been struggling to pay your current debt.

While there are significant advantages, you should also be aware that there are fees involved with the debt consolidation program. Please compare the fees with other organizations before you choose one. Every dollar counts when you are paying off your debt.

How Do You Start?

A debt consolidation program starts with a discussion with a professional credit counselor. The credit counselor will determine whether the program is right for you or not. If the credit counselor decides you should enroll, then the debt consolidation program will take over the repayment of your unresolved debts – the ones you choose to include.

Your bad credit loans will continue to exist, but it’ll now be possible for you to make one monthly payment. The funds will then be disbursed to different lenders. The organization you decide to handle the process will communicate with your various lenders during the initiation process and continue as the program progresses.

Is It The Right Decision To Consolidate Federal Student Loans?

When you visit the Federal Student Aid website, it clearly states, ‘consolidating your education loans can make your payments easy.’ However, it can also result in you losing some benefits. They then warn you to weigh the pros and cons and decide if a Direct Consolidation Loan is the best choice for you.

But how do you weigh the pros and cons? How do you determine whether it’s the right decision to consolidate your federal student loans or not?

Let’s find out.

What Is Direct Consolidation Loan?

Direct Consolidation Loans help you to combine multiple education debt into one big loan. The result is you pay one monthly payment rather than multiple monthly payments. You don’t have to pay for any application fee for your federal education debt loans to be processed.

Some private companies may contact you to offer their assistance to help you apply for the Direct Consolidation Loan at a fee. These companies have no affiliation with the US Department of Education or ED’s consolidation loan servicers.

These private companies are scammers, so watch out for them. The application process is free and straightforward. There’s no need for anyone to assist you.

Should You Consolidate Your Loans?

There’s no simple answer. It depends on your situation. However, remember that the primary reason most people consolidate their loans is to reduce their monthly payments. The best way to know if the Direct Consolidation Loan is suitable for you is to talk with your creditors and find out how the consolidation will affect your financial situation.


  •  Consolidation can simplify your loan repayment if you have student loans with different organizations. It can help you repay your debt with one monthly refund.
  •  It can lower your monthly payment by extending the period to pay back your loans.
  •  You can access additional repayment plan options and Public Service Loan Forgiveness if you consolidate your loan rather than Direct Loans.
  •  If you have a variable-rate loan fixed to an interest rate, you can change it.


  • If you consolidated, you might end up paying more interest due to the extended time to repay your loan than if you didn’t consolidate.
  • Outstanding interest on your consolidated loans becomes part of the original principal balance. It means that your interest may accumulate on a higher principal balance than when you did not consolidate.
  • You may lose some borrower benefits like principal rebates, interest rate discounts, or certain loan cancellation benefits that are linked to your current loans.
  • If you pay your current loans under an income-driven repayment plan, you’ll lose credit for payments made towards the repayment plan forgiveness, when you consolidate. In the same way, if you made payments toward the Public Service  Loan Forgiveness, you’ll lose credit for any payments made towards PSLF.

How Does Student Loan Consolidation Works?

When you consolidate your student debt loan, you are combining multiple debts into one repayment plan. After that, you make one loan payment, instead of making individual payments.  For example, take a look at these balances:

  • $20,000
  • $6,000
  • $4,000
  • $3,500
  • $6,000

The total is $39,500 in five student loan balances. But usually, you’d be paying five separate loan payments with five different interest rates. If you consolidate the loans, you’d have one loan with a balance of $39,500, which helps to simplify your finances.


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