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This is an impression most people carry when they think of debt consolidation. Let us get it out of the way once and for all - Debt consolidation is NOT a loan. In simple and straight forward terms, debt consolidation is just what is says it is ' it is the consolidation of your all your debts into a single large debt, and a single payment each month.

Most financial institutions and banks offer loans to people who are under a tremendous pressure of various debts. They term these as 'debt consolidation loans,' when in reality these are second mortgage loans on your home, or home refinance loans with high rates of interest.

What is Debt Consolidation

Debt consolidation involves approaching all your creditors to try to lower your monthly payments through a variety of ways, but without filing for bankruptcy. Just as you should never be your own lawyer, you should appoint a debt consolidation service to approach your creditors on your behalf. These experts, with years of experience behind them, negotiate a debt consolidation that benefits you, and the creditors get their money back. Debt consolidation experts have a well thought out plan, after assessing all your financial details, and are generally well received by your creditors.

Debt consolidation simplifies your monthly payments to a single payment each month and is NOT a debt consolidation loan. The single monthly payments after consolidation of all your debts are based on your ability to pay them as per your budget constraints. Depending, at times, your monthly payments are less by as much as 50 percent of what you used to pay earlier. Debt consolidation experts can help negotiate reduction or elimination of late fees and other penalties and charges, after bringing all your dues and debts to a current level, making your life much easier.

Go through the terms of the debt consolidation agreement drawn up between you and the debt consolidation company, and ensure you stick to the new repayment schedule.