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An example of street markets accepting credit . . . Image via Wikipedia
Credit consolidation or debt consolidation is the method of combining various credit card debts and other loans into one single affordable payment. Whenever you face any difficulty in managing your debts, you must think about credit consolidation before it becomes too late. You would be deemed as a good candidate for credit consolidation if you carry plenty of high-interest bills. It also helps you mend your credit.

A credit consolidation company would offer you a loan and by consolidating all your debts into one debt, you can pay it off with the proceeds of the new loan. Debt consolidation professionals always try to get you a reduced interest rate by carrying out constant negotiations with your creditors.

Credit consolidation takes all your debts and liabilities and transfers them into one account with one predetermined and reduced interest rate. You can consolidate the following debts and bills:

* Credit card debt
* Personal loans
* Student loans
* Old service bills
* Medical bills
* Attorney bills
* Tax debt
* Departmental store cards
* Collection agency debts

If executed suitably, credit consolidation would lead to a reduced yearly interest rate, reduced monthly payments and hence more discretionary income for you each month.

Debt Facts in the United States

* As stated by the Federal Reserve, the amount of American household debt has attained the $2 trillion spot and this does not include mortgage debt.
* American households with minimum one credit card had a debt of $9,000 for every credit card. Therefore, if an average household had three cards, the amount of debt would be $9,000 x 3 = $27,000.

Disadvantages of Credit Consolidation

While there would always be some individuals who apply debt consolidation to repay their debts, the majority of people would not do it. For instance, right away after consolidation of all their debts into a single debt, maximum people would keep on charging to their credit cards and exceed their limits. What takes place after this? They fall into the debt trap once more.