Consumer Debt Consolidation

Debt Consolidation can help your debt problems

Your financial situation is different from anyone else. You should take the time to understand all the available consumer debt relief options to find the best solution for your needs and goals.

What Is Debt Consolidation?

Consumer Debt Consolidation (often referred to as debt management) is a process of combining your unsecured debts into a single, larger debt (loan) with a more favorable interest rate, payment terms and lower monthly payment.  Examples of unsecured debts that can be consolidated include credit cards, personal loans, medical bills and some types of student loans.   The goal of debt consolidation is to improve your financial situation by lowering your TOTAL costs of financing your debts.

Consumer debt consolidation simplifies loan repayment, offers a means of reducing your average interest on your unsecured debt, usually lowers your total debt costs and helps you get out of debt faster. There are many factors that come into play to get you the best possible average interest rate. These factors include the type of debt, your income,  credit score, payment discipline, and other factors.

Credit Card Debt Consolidation

Credit card debt consolidation

Credit card debt is an unsecured personal loan from the credit card issuer. This type of debt has high interest rates, established credit limits and monthly payment obligations. Consumers often have multiple credit cards, with different terms. This is the primary type of debt to consolidate to manage and reduce your financial costs.

Credit card issuers offer consumers balance transfer cards with high credit limits to entice them to transfer and consolidate multiple credit card account balances. Normally these types of credit cards offer low introductory interest rates (often 0%) and can serve as an alternative to a traditional personal loan.

If you are able to pay down your credit card debt during the introductory period, you will be using a zero cost loan to pay off high interest debt, a big savings to you.

Non-Secured Debt Consolidation

other non-secured debt consolidation

Personal loans, medical expenses and private student loans are the other major component of consumer unsecured debt. These types of debts will generally have lower interest rates than credit cards, but the payment obligations and fees will vary. This is the other type of debt to consolidate to manage and reduce your financial costs.

A traditional unsecured personal loan should be used for this type of debt consolidation. Various factors will determine the loan amount and interest rate, particularly your income and credit score. However, if the unsecured personal loan interest rate is not significantly lower than your existing debts, it may not be worthwhile to consolidate debts.

Note that balance transfer cards can also be used to consolidate some of these debts.

How Does Debt Consolidation Work?

Consumer debt consolidation is simple in principle. You borrow money and pay off your unsecured debt balances and remain with one, often larger debt, to pay off. Ideally, this single payment will have a lower interest rate than your unsecured debts, so you’d pay less in interest while paying down the debt. The main goal is to reduce or eliminate the interest rate applied to the balance. This makes it faster and easier to pay off credit card debt.

In many cases, you can get out of debt faster, even though you pay less each month. Debt consolidation essentially gives you a more efficient way to eliminate debt.


Do It Yourself

You apply for and take out new financing to pay off your existing credit card debt balances. Basically this is new debt at a lower APR used to pay off old debt at a higher APR. Your goal is to pay off your credit card debt faster by applying more of your payment to the principal balance, at a lower interest rate. There are two options available to you.

A balance transfer credit card – Many lenders offer this type of credit card to consolidate unsecured debts. You use this type of card to consolidate your existing credit card balances to this new credit card.

These types of cards offer special “teaser” 0% APR introductory rates on balance transfers, giving you a limited time to pay off debt interest-free. At the end of the introductory period, the balance transfer credit card APR will increase and may be higher than what your are currently using.

You need to account for lender balance transfer fees when determining the total cost to cost of consolidating your credit card debt.

A debt consolidation loan – You take out an unsecured personal loan at a lower interest rate than your existing credit card debt. You use the funds from the loan to consolidate and pay off your existing credit card balances. This leaves only the low-interest loan to repay.

You need to account for lender loan origination fees when determining the total cost of consolidating your credit card debt.

Either financing option normally allows you to consolidate other non-secured debts besides your credit cards.

Debt Management Program

The Debt Management Program is a central fund administered by the credit counseling agency.

The credit counselor will review with you which non-secured debts, like your credit cards, medical bills, and personal loans you wish included. You will NOT have access to any credit card in the DMP. You might keep one credit card out for emergencies.

Based on your budget and debts, you and the credit counselor will determine a monthly payment amount.

Your credit counselor works with your lenders to agree to participate and lower your debt costs (APR and late fees).

You make monthly deposits to the credit counseling agency.

The consumer debt counseling agency uses your deposits to pay your creditors monthly.

Normally there is a set up fee and monthly fee for administration.

The basic benefits of a Debt Management Program include:

  • Reduce And Stop Debt Collector Calls
  • Potentially Lower Debt Interest Rates
  • Lower Monthly Payments
  • Waiver Of Late And Over Limit Creditor Fees
  • Potential Paying Off Your Debts Faster
  • Improving Your Credit Score By Making Consistent, On-Time Payments


Debt consolidation is not the same as debt reduction. The amount of unsecured debt being financed remains the same. It simply moves from several small to one large personal loan. It is a matter of how expensive (interest charges) it will be for you to pay off the debt. The debt still needs to be paid off. It didn’t just disappear.

Most Americans carry an excessive amount of credit card debt. While convenient as a form of payment, it is an expensive type of debt to use and requires financial discipline. Many lack this.

Debt consolidation is not the same as debt reduction. The amount of credit card debt being financed remains the same. It simply moves from several small to one large personal loan. It is a matter of how expensive (interest charges) it will be for you to pay off the debt. The debt still needs to be paid off. It didn’t just disappear.

Debt Consolidation will not eliminate your unsecured debts but will help you get them under control. It can be a successful debt relief option when:

  • Your unsecured credit card debts are at least $10,000 or greater.
  • You can consistently support the debt consolidation loan without resorting to new credit card purchases for your other monthly expenses.
  • The debt consolidation loan APR should be significantly less than your credit card accounts.
  • You have the discipline to not use credit cards until the debt consolidation loan is paid off.

Debt consolidation, when used properly, should improve your credit profile with time.

With the debt consolidation loan funds you will be paying off multiple credit card accounts. This is positive for your credit profile.

The multiple credit card accounts should be kept active rather than canceling them. Each of these credit card accounts has an unused credit limit. The sum of these unused credit limits increases your total amount of available credit. This lowers your Credit Utilization ratio, where less than 30% is positive for your credit profile. You improve your “credit worthiness” as a consumer.

You need to be consistent in your payments of the debt consolidation loan, otherwise this will be negative for your credit profile.

As your credit card balances are paid off you should do a thorough review of your credit report to ensure that the accounts are probably updated. Delays and mistakes can happen

And finally you need to avoid the biggest mistake people make after consolidating credit card debt. That is, not stopping making new credit card charges.

Debt consolidation is to allow you to focus on eliminating, not adding to your credit card debt.

Credit Repair | Identity Theft

Frequently Asked Questions

Debt Relief Services

Debt relief refers to resolving your debt without taking out a new loan. Our financial partner debt relief program is designed to help you save as much money as possible, as quickly as possible, based on the money you have available. It puts you back in the driver’s seat to get you the maximum savings on your debt.

Our financial debt relief partner offers an in-house debt relief program where fees are earned based on results of the program. The way this program works is that money will accumulate on a monthly basis in a special purpose account. Alternatively, you may have a lump sum amount that will accelerate the program. Based on the amount of money accumulated, our financial debt relief partner will negotiate the best possible reductions for your debt. Each account is negotiated and resolved until all of them are settled.

Our debt relief financial partner offers services related to tax problems such as tax liens, wage garnishments, delinquent payroll tax issues, and other tax related issues. In some cases just by getting proper tax returns filed, a significant adjustment in the amount of taxes owed is realized.

Our debt relief financial partner is a member in good standing with the AFCC, the largest and oldest association for debt relief companies. In order to be a member of AFCC, a debt relief company has to comply with a stringent set of requirements and disclosures and maintain these standards in order to keep up with renewals.

As an alternative to bankruptcy, a debt relief strategy is the best and fastest way to get out of debt. However, there are conditions that must be taken into account for the program to work.

The most important factor that determines the success of a debt relief program is the individual’s ability to fulfill their payment obligations on a monthly basis for the duration of the program.

A number of factors influence the cost of entering a debt relief program such as the creditors you owe, your credit balances, your ability to contribute monthly dedicated account payments into the program, the amount that can be negotiated from your balance, how quickly it is negotiated, and the fees charges.

Our debt relief financial partner fees, on average, are 20% of the total debt amount enrolled and are calculated as part of your monthly repayment. There are no upfront fees to be enrolled in our debt relief financial partners’s relief program.

The goal of the debt relief program is to help save you as much money as possible, as fast as possible.

Our focus is to help you save as much money as possible, as soon as possible. Your focus should be on your job or business and family. It’s hard enough having to manage everything going on around you and still have to worry about your debt. Our debt relief financial partner has professional, trained staff to provide you with the best way forward.

While you ensure that you make your payments monthly, which may account for 2% of the effort, our debt relief financial partner is working tirelessly to ensure that the other 98% of the process is in place and managed to help you save money and be debt free as quickly and painlessly as possible.

Loans such as federal student loans, certain credit union accounts, and government loans are not eligible to be included in a debt relief program. Any loan that is secured to a physical item, such as auto or mortgage cannot be included.

Private student loans, that are not government backed, may be included in a debt relief program.

Our debt relief financial partner is licensed and/or bonded in numerous states. Our debt relief financial partner is in full compliance with federal and state laws, as well as meeting any licensing and bonding requirements as needed by each state where it provides services.

Once you are enrolled in a debt relief program, your responsibilities will include keeping up a great line of communication and making payments on a monthly basis into a special purpose account.

Our debt relief financial provider will handle the rest of the process and make sure that you save you as much money as possible, as fast as possible for as long as you are in the program.

Qualified candidates are those who have a legitimate financial hardship, which has caused them to fall behind on their payments to creditors, or will cause them to fall behind in the near future. Our debt relief financial partner only represents consumers who are truly in need of its services and stand to significantly improve their financial situation.

Due to your legitimate financial hardship, you are able to participate in this savings program in order to help pay your debts in the future. We are not here to advise you not to pay your debts now, however if you are able to make payments to your creditors, then you probably don’t actually have a legitimate financial hardship.

According to the US government: ” A taxpayer is insolvent when his or her total liabilities exceed his or her total assets. The forgiven debt may be excluded as income under the ‘insolvency’ exclusion. Normally, a taxpayer is not required to include forgiven debts in income to the extent that the taxpayer is insolvent.”

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Consumer Credit Repair

The Fair Credit Reporting Act (FCRA) was written in 1970 as an amendment to the Consumer Credit Protection Act. The FCRA provides additional measures of consumer protection in the areas of fairness, accuracy, and privacy of the information collected by the credit bureaus. It also allows you to personally engage in credit repair and maintenance processes, verifying that the information in your credit report is correct.

A credit bureau – sometimes called a “consumer reporting agency” – is a business that collects relevant consumer information from creditors and courthouses, and then sells that information to interested parties such as potential lenders. Such information is sold in the form of a credit report. In the U.S., the three major credit bureaus are TransUnion, Experian, and Equifax.

Normally negative items will remain on your credit report for seven years, with the exception of bankruptcy (ten years). You may choose to dispute a negative item, but if it is accurate, the dispute will be rejected and the item will remain on your credit report. However, if the negative item violated consumer protection laws, it may be removed.

When an account is unpaid for more than 180 days, a creditor usually writes off the debt as a loss on their financial statements. This is known as a charge off. Once a debt is charged off, it is either transferred to an in-house collections department or sold to a third-party collection agency who will likely contact you in attempt to recoup the balance.

The time it takes to repair your credit is completely dependent upon your personal situation. Six months should be your guide if you have many issues with your credit report.

It is a common myth that negative items must remain on your credit report for a minimum number of years. In fact, there is no minimum time-frame. Creditors control the information they provide to the credit bureaus. They can also choose to remove negative items as well. The Fair Credit Reporting Act requires all reported information to be fair, accurate, and substantiated. If these conditions are not met, the credit bureaus are required to remove it.

Credit Repair is actually the process of removing inaccurate, unfounded, out of date, false, and erroneous information from your credit report.  Your credit report dictates your credit score.  The 3 major credit bureaus collect information from lenders, creditors, and debt collectors and apply it to your credit report.  Based on that information, your credit score is determined.  This information could include the balances on loans or credit cards, credit inquiries, debt to income ratio, and most importantly, credit utilization (the percentage of debt you have to available credit)

This is determined by what your goal is.  Perhaps you are trying to buy a house.  If this is the case, you might want to get started at least 6-9 months before you plan on purchasing.  If you plan on purchasing a car, then you might to get started in 2-3 months.

You have the ability to dispute any information on your credit report you deem as inaccurate, unfounded, or incorrect.  However many consumers have tried doing this themselves only to find out that the process takes too long, is confusing, and full of challenges they deem too stressful to deal with themselves.  A third-party credit repair company can take the burden of disputing off your hands and have the ability to speed up the process through their experience.  Think of a third-party credit repair company like you would think of a Tax preparer, Legal Service, or even a plumber.  You could probably do it yourself, but perhaps not with the same end results. We highly suggest that all of our clients and prospective clients take some time to learn about their credit, credit reports, as well as the process of repairing their own credit.  You may feel doing it yourself is the better route for you and your situation.

A good credit score helps you obtain low interest rates and long term loans, like home loans or car loans. Lenders may charge high interest rates or impose undesirable repayment plans for you. Given the stakes and the consequences involved, it is clearly to your advantage to work toward recovering from a bad credit rating.

Credit Bureaus are companies that maintain records of your credit lines and performance. Records can go back for up to ten years, in the case of bankruptcy data. Creditors, banks, mortgage companies and other financial institutions supply this information to the credit bureaus. The credit bureaus then compile this data into your a credit report. A credit report has details of how you have managed credit in the past, so other lenders can judge your credit worthiness.

Most likely your credit report has errors.

The Federal Trade Commission reported in a study conducted in 2012 that 26% of the credit reports they analyzed had errors. Of those with errors, 5% who disputed these errors increased their credit scores at least 25 points. That is a significant change in a credit score.

You should not assume that your credit reports are completely accurate.

No. Your credit report is independent of your spouse. The same is true of your credit scores. However…

A lender will likely take into consideration both of your credit reports when deciding on a home mortgage, for example. If your credit report is bad and your spouse’s good you may find that the loan, if approved, has a higher interest rate than if both were good.

It certainly can. Many employers will do a credit check of a potential employee to determine the stability of the job candidate. For job positions that entail financial responsibility, it is most likely you would experience a credit report check.

When you are initially contacted by a debt collector regarding an unpaid debt, you have the right to request proof of the debt within 30 days of initial contact. This is called debt validation. Unless the debt collector can validate that you are responsible for the debt, they must stop all further collection efforts.

The debt validation letter from collector needs to include: 1) Proof the debt exists; 2) Proof that you are responsible for the debt; and 3) Proof that the debt collector has legal right to collect on the debt.

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