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I just read somewhere that eventually, everyone sits right down to a banquet of consequences. This is especially true in the case of debt. It's possible to have an enjoyable experience accumulating debts but eventually there will be consequences and they won't be pretty. If you have a massive amount of debt, you know precisely what I mean. You're probably receiving harassing telephone calls from your creditors or, worse yet, from debt collectors both day and night. You could think about changing your telephone number simply to eliminate that never-ending barrage of calls. But believe me when I say that if you do this, you'll enjoy only short-term respite from those nasty calls as creditors are amazingly adept at finding people who have changed their numbers.

How debt consolidation reduction works

The simplest explanation of how debt consolidation works is you use new debt to repay old debts.

There are several ways you can accomplish this. For instance you can get a bank loan and repay all of your creditors. Alternately, you could visit a non-profit consumer credit counseling agency for help. Or you might perform a balance transfer in which you transfer the balances on high-interest credit cards to one having a lower rate. It's even possible to obtain a 0% interest balance transfer card, which may need you to don't pay interest whatsoever for as few as six or as many as 1 . 5 years.

The way a debt consolidation reduction loan saves money

All of these types of debt consolidation can help you save money. Let's take a bank loan for example and let's suppose your debt $15,000. In case your debts have an average APR of 20% and total payments of $600 a month, it might take you 17 years being free of debt and also you would pay you use $25,611. However, should you be capable of taking out a debt consolidation loan at 9.95%, you may be free of debt in 48 months, and would pay a total of just $18,112 or perhaps a savings of nearly $7,500. You'd be also debt free 13 years faster.

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How consumer credit counseling may help

Another popular method to consolidate debts are through consumer credit counseling. The way this works is you are assigned a counselor who will help you develop a payment plan and negotiate together with your creditors to obtain your interest rates reduced. If all your creditors accept your plan, you would then be asked to send the loan counseling agency one payment a month until you completed your plan. While you can't really say exactly how much you'd save with consumer credit counseling, it should be a respectable amount.

The way a balance transfer could save you money

You could also cut costs if you were in a position to transfer your balances on high interest credit cards to one having a lower interest rate. Returning to the example of $15,000 in debt in an average APR of 20% and when you wanted to be free of debt in 36 months, your payment per month could be $558. In comparison, if you transferred that $15,000 indebted to some card with a 12% interest rate, your payment per month would be just $499 or a savings of nearly $60 per month.