Will Debt Consolidation Leave You With A Huge Debt Ratio?

Absolutely not! This is just one more misconception about debt consolidation that has given the process such a bad name. In fact, it will do just the opposite, and probably reduce your debt to income ratio, which is the largest item, by importance, that is used to calculate your credit rating. In fact, debt consolidation will do just the opposite, and probably reduce your debt by quite a bit.

This is because, first and foremost, the loan that you will be taking out is, for the most part, identical in size to whatever you are consolidating. This is because, as the name implies, debt consolidation is simply taking out another loan to cover the debt that you already have. Therefore, at the outset, your level of debt will not change at all. Furthermore, consolidation, because it is run by experienced people who are very likely to understand your situation, is extremely likely to have a lower interest rate than any of your other debts. Because this is a special type of refinancing, you can get a lower rate, which will allow you to have lower and more affordable monthly payments, reducing your level of debt. Also, you may even be able to move from an unsecured to a secured loan if you are in serious financial trouble, which will seriously reduce the rate on your loan.

Also, you are likely to find that other services that any given debt consolidation company offers are extremely helpful in reducing your level of debt. Most consolidation companies give free financial analysis, to make sure that you never get back into your level of debt again. This sometimes includes comprehensive planning, and is normally of a value greater than what you are paying the company in interest. In fact, these types of planners are probably altogether better than paying an expensive expert. This is because these people deal daily with those who have poor credit and know exactly what is needed to improve it. An expensive expert simply won't have that kind of "real-world" experience. In my opinion, it is extremely unlikely that your debt ratio will increase if you consolidate your debt.