We give you an immediate strategy and a long-term game plan while remaining by your side throughout every step of the process.[Disclosure: Cards from our partners are reviewed below.] Debt consolidation is a type of debt refinancing that allows consumers to pay off other debts.And then there’s the risk of increasing your debt if you fail to make your payments under a debt settlement program.
(You can learn more about choosing a credit counselor here.) If you don’t pay your debt, creditors could hire debt collection agencies, which could lead to a lawsuit, the CFPB says.
Not paying creditors will also show up as a negative transaction on your credit report that makes it harder to borrow more money.
If an offer sounds too good to be true, it probably is.
There are several different types of consumer debt.
In general, debt consolidation entails rolling several unsecured debts, such as credit card balances, personal loans or medical bills, into one single bill that’s paid off with a loan.
There are dozens of ways to go about consolidating debt, and some include transferring the debt to a zero or low-interest credit card, taking out a debt consolidation loan, applying for a home equity loan or paying back your debt through a debt repayment consolidation plan.If you’ve built up some equity and interest rates seem favorable, it may make sense to refinance your home and use the additional cash you can borrow to pay off more expensive debts.Or you might be better off taking out a home equity line of credit (HELOC) or a fixed-rate home equity loan.This type of debt is most commonly seen with mortgages.Variable interest rate debt is a shifting interest rate, like you would find with credit cards, and will change at some point throughout the duration of the debt.That’s because some may be debt settlement companies that convince you to stop paying your debts and “instead pay into a special account,” the CFPB warns.