Is Debt Consolidation a Loan?

Is Debt Consolidation a Loan?

There is a bit of confusion out there on what the true meaning of debt consolidation is. Some say it is a loan, some say it is not, or is there a bit of truth to each statement given the circumstances present. Often the terms debt consolidation and a debt consolidation loan go hand in hand and are used interchangeably. But let's look at this a little more.
Consolidate means to bring together into one unit, to combine… So naturally debt consolidation should mean to combine all of your debts (what you owe to others, specifically companies that have charged you for goods or services) into one debt, or one bill and therefore one payment. There does not sound like a loan in that meaning. The reason why the word "loan" comes into play is because banks or other credit institutes will often give you a loan in order that you then go and pay off each bill yourself then you what remains is one new bill that you pay off (the money you now owe the bank for lending you the money) If though a bank/financial institution, it often ends up being a what is known as a "secured" loan, where you would have to put up collateral to ensure payback of the loan. There is also an "unsecured" loan where there is no collateral, often used for people with nothing to put up front. Usually there are higher rates associated with an unsecured loan due to risk issues. If you default on the loan, the only way the issuer can get there funds back is through court (obviously not mentioning "non-professional" methods such as threatening or intimidation)
Where ever there are services out there for your help, there are others who would rather take on such endeavors by themselves. Sure you can try to get in touch with your creditors and try to set up lower payments, lower or eliminate interest and any other tricks you may think of but you really end up being on your own. I'm not trying to talk you out of it if you are really hot after the idea. But when you consider what is at steak, it is most often in your best interests to consult a trained expert with years of experience working with these situations. I am talking about the expertise of a debt consolidation or credit counselor. You can also represent yourself in a court of law too, seriously you can, use a search engine and look up! They will give you "plain English" and "easy to understand" methods, "safely and effectively" with testimonials etc. Hmmm, would you want to do such a thing? Some would and some would not, you be the judge. Also be aware that Creditors are usually more willing to work with professional representation or at least a well laid out plan. That is where proper debt consolidation can help out. As merely a disclaimer, always read any fine print and ask any questions you have so you know exactly what will be required of you (your new one monthly bill, and usually not accumulating more debt) now pat yourself on the back for starting the ball rolling in getting out of debt.