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Even one late payment will have a negative impact on your credit scores.Before entering into any debt consolidation plan, research the offer to make sure that the company is reputable and that you fully understand the terms and implications of the program.Financial situations change all the time, so you might be able to receive a better interest rate on a personal loan than the existing rate on an older line of credit you have.Let’s say you have ,000 in credit card debt and your card has a 17.99% interest rate/17.99% APR, and you are making the minimum monthly payment.* You recently checked out your debt consolidation options and qualify for a 36-month personal loan with a 12.5% interest rate/15.742% APR.Consolidating debt with a loan could reduce your monthly payments and provide near term relief, but a lengthier term could mean paying more in total interest.When people mention debt consolidation, they are usually referring to one of two different methods.
Maybe you’ve made a few positive strides to get your finances on track or you recently got a raise at work.
You then make one "consolidated" payment to the debt settlement company each month, and in turn the company makes payments to each of your creditors on your behalf.
Once an account is included in this type of program, the creditor will close the account.
Even though the debt consolidation company will be making payments on your behalf, you will still be responsible for ensuring those payments are made to your creditors on time.
If the debt consolidation company fails to make a payment on time, the late payment will be reflected on your credit report.
Debt consolidation is just one strategy you can use to help with your finances.