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My debt is as follows:
Student Loans: approximately 25k
Credit Card : 5,500
Car Loan: 8k

I am about to enter my 3rd year in my first “real job” after college- and i think its time to get ahold of my finances. I am no longer taking loans (obviously) or using my credit card.. and my each religiously monthly.

But.. ive heard about debt consolidation loans and im confused:

1. do they lower your monthly payment?
2. Do they negatively affect your credit?

If someone could explain what they are, if theyd be good for me, pros and cons etc id really appreciate it!


4 Thoughts on Im confused about “debt consolidation loans”- can someone explain?
  1. Reply
    July 13, 2011 at 11:15 pm

    You basically get a loan for $ 38,500 and pay off all your bills. You will then make 1 payment on the $ 38,500.

    As long as you don’t run the credit card back up or acquire any more debt you will have the one payment. Yes sometimes this will result in a lower payment.

    Before you do make sure the interest rate is lower than the debts you have. Otherwise only consolidate the bills that will bring a lower fixed interest rate.

  2. Reply
    July 14, 2011 at 12:00 am

    Consolidation loans are good if you have the discipline to keep your spending under control. They take all you cards and loans and pay them off giving you a single larger loan. This loan is usually at a lower interest rate and extended over a longer time period.—So this means a lower payment then all your payments that you are making now.
    But be careful it may mean paying for the car for a few more years then you had originally planned and all that stuff on your credit cards will be spread over a few years as well.
    It is good to get you back on your feet but stay focused and don’t think “gee I do not owe any money on my cards now so I can go and spend again”
    The facts are unfortunately most people after consolidating owe the consolidating loan and there cards are back to max within 2 yrs.
    Tear up the cards————–

  3. Reply
    July 14, 2011 at 12:43 am

    Since most of your debt is student loans, you probably have as good a deal there or better than a consolidation loan.

    A consolidation loan is a loan you get to pay off a lot of other debts – theory being that the interest rate is lower and you have a longer, fixed time to pay it off. In your case, it seems like to just keep doing what you’re doing makes the most sense.

  4. Reply
    July 14, 2011 at 12:56 am

    Debt Consolidation Help comes in many forms, from payment plans to loans to resolution strategies, so it is important that you spend some time prioritizing your own personal finance needs, concerns and financial situation before signing up for any debt consolidation help program.

    The four primary concerns for most consumers are:
    i) monthly payment
    ii) time to debt freedom
    iii) total cost, and
    iv) credit rating impact of the debt consolidation program

    Be sure to evaluate each program, relative to your prioritization of these factors.

    Since there are a variety of debt consolidation options, including credit counseling, debt negotiation/debt settlement, a debt consolidation loan, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.

    Credit Counseling
    Credit counseling, or signing up for a debt management plan (“DMP”), is a very common form of debt consolidation. There are many companies offering online credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a credit counseling program, you are still repaying 100% of your debts – but with lower monthly payments. On average, most online credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan DOES show up on your credit report… and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy – or using a third party to re-organize your debts. This is typically a good form of debt consolidation help if you have lots of high interest credit card debt and just want a lower monthly payment.

    Debt Settlement and Debt Negotiation
    Debt settlement, also called debt negotiation, is a newer form of debt consolidation help that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years – so they are a short programs with low monthly payments that can save you the most money while avoiding bankruptcy.

    It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Bankruptcy. The trade-off here is a negative credit rating versus saving money.

    Debt Consolidation Loan
    Many people think first of a debt consolidation loan when seeking debt consolidation help. Usually, this is reserved for home owners with equity in their homes that can be tapped to payoff other debts. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one or more loans for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate credit card debt.

    It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that the total cost and the time to debt freedom could be very high… but the monthly payment will be lower than other options and there is no credit rating impact.

    Net-net: While there are many forms of debt consolidation help, many people with good to perfect credit who own homes should look into debt consolidation loans, while consumers with high credit card debt and poor credit may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the debt consolidation help program and option that fits for you.

    A website such as can help you get a free consultation about your debt consolidation options.

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