Debt consolidation is another popular approach to managing a burdensome debt load. When most people use the term “debt consolidation,” they mean one thing. But most of the services out there that offer debt consolidation mean something entirely different.
Here’s a simple multiple choice test question:
Debt consolidation is:
- Borrowing enough money from a bank or finance company to pay off all your bills at one time, leaving you with a lower interest rate and a single lower monthly payment.
- Borrowing against the equity in your home to pay off credit cards and other unsecured debts.
- A service offered by non-profit organizations called Consumer Credit Counseling Services, who work with your creditors to lower your interest rates and help establish a repayment budget.
- All of the above.
- None of the above.
What’s your guess? The chances are that you’ll pick (a), because that is what most people think of as true debt consolidation. However, the correct answer is (e) “all of the above.”