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It is also a risky one, a debt relief option so fraught with misunderstanding and negatives that most financial experts would recommend it only as a last resort. You, or a representative negotiating for you, make an offer to your creditor to settle the debt for less than what is owed.For example, if you owed ,000, you might offer the creditor a lump-sum payment of ,000.Loan consolidation means combining student loans from one or many lenders into one new loan from a single lender.
Debt settlement and debt consolidation are two forms of financial help for people struggling with more debt than they can repay.
You might pay down your debts through a balance transfer or interest rate negotiation.
Both put the control in your hands, which can be good or bad, depending on how disciplined you are.
How to know if consolidation loans make sense Before you rush off to your bank or credit union for a debt consolidation loan there are some things you need to know in order to understand whether it makes sense.
The first of these is that the interest rate on your debt consolidation loan should be lower than the rates of the debts you’re consolidating.
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If you have three credit cards with interest rates of 22%, 20% and 18% your interest rate would be 20%.