How Debt Consolidation Works

Debt consolidation is becoming one of the most attractive options for consumers who are looking to borrow better with reduced debt. In this process, a consumer's existing debts - usually credit cards and possibly student or auto loans - are transferred into a single loan that is gradually repaid over a set period of time (usually 10 years). By doing this, creditors are satisfied and consumers are put in a position where they can pay off their debts and return their credit back to normal. The process allows consumers to gradually regain control of their financial lives.

Before deciding to consolidate your debts, you should take the time to conduct an honest assessment of your financial life. Get a copy of your credit report and review it. Total the amount of debt you owe, and then look at your bank accounts and total your savings. Are you going to be able to manage this debt without help? Are you concerned that you might need to think about bankruptcy soon? If you are experiencing serious financial concerns, debt consolidation could be a solution that helps you put your life back in order. Here's how it works:

• Get competitive quotes: By using a service such as DebtBorrowers.com, you can receive competitive quotes from a variety of respected debt consolidators. Just provide basic information such as your contact information and how much debt you're looking to consolidate, and you will be matched with consolidators in your area who best meet your needs. It's up to you which lender - if any - to work with. Remember: You're in control of the process.
• Start applications: You'll need to receive loan consolidation quotes to determine which proposal is best for you. Make sure you have information on hand, including how much you make monthly, your recent pay stub, bank account statements and any other credit information that may be of interest to your consolidator. All of these factors will play into the type of loan proposal generated for you.
• Carefully review quotes: Once you've decided which loan consolidators interest you, take the time to review each of their quotes. Look over which debts would be satisfied - and which you will still be responsible for. Review the loan term: How long will it take to repay your loan? Look over the interest rate and monthly payment, and compare them to your existing debts: Are they higher or lower. You also should review terms and conditions, such as whether there is a prepayment penalty or fees associated with taking out the consolidation loan. If you have any questions, be sure to ask your consolidator at this stage.
• Select the consolidation loan that's best for you: Once you decide on a consolidation loan, it will take some time to prepare the documentation and pay off your creditors. Depending on your personal financial situation, this could take several weeks. Continue paying your bills when they are due while this process continues. Your consolidator will notify you when your loan is ready and your creditors have been paid.
• Pay off your debts! Now that you've consolidated your debts, you will be able to manage your finances and repair your credit in a responsible fashion. Be sure to make your payments on time each month, and put your focus on getting out of debt and saving.