How does debt consolidation work?

Debt consolidation is a strategy that combines multiple debts into a single loan or payment plan. It works by acquiring a new loan or line of credit that covers the outstanding debts, allowing the borrower to pay off all debts at once. This new loan usually has more favorable terms, such as lower interest rates or extended repayment periods than the previous debts. By consolidating the debts, borrowers can simplify their financial obligations and potentially reduce their overall interest payments. Debt consolidation services typically negotiate with creditors on behalf of the borrower to secure favorable terms and ensure a smooth repayment process. It is important to note that debt consolidation should be accompanied by responsible financial management to avoid accumulating new debt while repaying the consolidated loan.