Debt Consolidation Facts

Debt Consolidation Facts

Searching for debt consolidation facts is often harder than it should be; not just because there are a lot of debt consolidation facts to know, but because there are really good debt consolidation facts, and unfortunately, some really misguided so-called “debt consolidation facts”. Separating the useful from the useless can be quite an ordeal to the average person.

So let’s clarify and simplify things by looking at two fundamental debt consolidation facts that every borrower - regardless of his or her debt situation - should know.

The mother of all debt consolidation facts is that a debt consolidation loan is intended to replace existing debt with a new loan. This new loan is pegged at a lower interest rate than the loans that it replaced. The bottom line for borrowers is that they have the same amount of debt as before, but they now have a lower interest rate to work with. This is the most important of all debt consolidation facts because it provides the foundation from which all other debt consolidation facts flow. So please make sure that you have this particular fact down cold!

The next step on the road to knowing your debt consolidation facts is to look at interest payments versus principal payments. Because a debt consolidation loan is pegged at a lower interest rate (as noted above), this means that borrowers will have more “cash” at the end of the month.

How borrowers spend this cash, however, is the central core of this “son and daughter” of all debt consolidation facts (to extend our family analogy!). Some, or ideally all, of this new “cash savings” should go towards the principal of the new consolidation loan. In this way, the borrower is able to owe less and less each month. This is the road to debt freedom, and borrowers who understand the importance of this point - above so many other debt consolidation facts - increase their chances of successfully emerging from debt.

So there you have it: the two most important debt consolidation facts that you need to know in order to head in the right direction: the one that leads out of debt, and into long term debt freedom.

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