Debt consolidation lets you roll several debts into one loan with a lower interest rate and longer payment term.That means you’ll pay less each month to just one lender instead of many.Even one late payment will have a negative impact on your credit scores.Before entering into any debt consolidation plan, research the offer to make sure that the company is reputable and that you fully understand the terms and implications of the program.Even though the debt consolidation company will be making payments on your behalf, you will still be responsible for ensuring those payments are made to your creditors on time.If the debt consolidation company fails to make a payment on time, the late payment will be reflected on your credit report.
Programs like this may lower your monthly bills, but because you are not re-paying the full amount owed on your accounts, your creditors will likely report those accounts as “settled” or “settled in full for less than the full balance.” Because it indicates that you did not pay the account as agreed, a status of settled on your credit report will impact your credit scores negatively, even if there are no late payments on the account.
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The first is the kind you describe, where you apply for a personal loan, preferably one with a relatively low interest rate, and then use the money from that loan to pay off all your credit card balances at once.
Once all of your other accounts are paid in full, there is only one payment to make every month – the one to the new lender.