Debt Consolidation: Debt consolidation is a very beneficial process to solve your numerous debts. Here your multiple debts are consolidated into a single amount. On approaching a debt consolidation firm the consultant first analyses your present debt amount. The debt consultant then negotiates with the creditor on your behalf and reduces your debt amount to around 30%-60%. In most cases interest rates are reduced. Late fees and hidden taxes are also waived at times. The revised consolidated debt amount is divided into easy monthly installments that make your repayment plans much easier.

Debt Consolidation loan: The debt consolidation loan helps you in combining all your outstanding debts in one loan account. For example, you may have an existing loan with a balance of $2,500 (15% interest rate), a credit card balance of $1,000 (12% interest rate) and a store card balance of $500 (10% interest). These could all be consolidated into one loan of $4,000 (8% interest). The purpose is to actually reduce monthly repayments. Either the interest rates are lowered on the new loan, or the repayment period can be extended.