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How does debt consolidation work?
Home » Investing » Debt Consolidation » How does debt consolidation work?Simply put, it is the process of taking out a brand new loan to pay off all old debts. This new loan allows easier, affordable monthly payments and also allows the debtor the ability to get out from under the amount of debt he/she is in. The time factor is dependent on the amount of money owed as well as the amount of the monthly payment. The higher the monthly payment, the quicker the loan will be paid off. If you owe a debt of $10,000, and the maximum monthly payment you can afford is $100 a month, it will take you 100 months or almost eight and a half years to repay the debt. However, if the maximum monthly payment you can afford is $250, it will take you only 40 months or almost three and a half years. The repayment period is directly related to the monthly payment and the amount of debt that is owed. There are many companies that offer debt consolidation services. Some of these companies require a service fee while others offer free services. However, the most efficient way to choose a company is to do research and find one that best fits your specific needs.
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