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Consolidating your 12016 debt

Here are the top things you need to know before you consolidate your debt: But here’s the deal: debt consolidation promises one thing but delivers another.That’s why dishonest companies that promote too-good-to-be-true debt relief programs continue to rank as the top consumer complaint received by the Federal Trade Commission.

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You might qualify for an unsecured debt consolidation loan at 7% — a significantly lower interest rate.Debt settlement companies negotiate with creditors to repay less than you owe, in return for a substantial cut of the savings.Damage to your credit is severe, and the process can take years.Conversely, making minimum payments on credit cards could mean months or years before they’re paid off, all while accruing more interest than the initial principal.If your debt load is small — you can pay it off within six months to a year at your current pace — and you’d save only a negligible amount by consolidating, don’t bother.Something has to change, and you’re considering debt consolidation because of the allure of one easy payment and the promise of lower interest rates.

The truth is debt consolidation loans and debt settlement companies don’t help you slay mammoth amounts of debt.

More Debt consolidation can help your credit if it helps you make on-time payments or shrinks balances on revolving accounts, especially if credit card balances were near their limits.

Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.

If you’re dealing with a manageable amount of debt and just want to reorganize multiple bills with different interest rates, payments and due dates, debt consolidation is a sound approach you can tackle on your own.

Check our debt payoff guide to further assess your options.

In fact, you end up paying more and staying in debt longer because of so-called consolidation.