Once in place, a debt consolidation plan will stop the collection agencies from calling (assuming the loans they're calling about have been paid off). The Internal Revenue Service (IRS) does not allow you to deduct interest on any unsecured debt consolidation loans.
If your consolidation loan is secured with an asset, however, you may qualify for a tax deduction.
There are also several consolidation options available from the federal government for those with student loans.
Theoretically, any use of one form of financing to pay off other debts is practicing debt consolidation.
Even if the monthly payment stays the same, you can still come out ahead by streamlining your loans.
Say that you currently have three credit cards that charge a 28% APR; they are maxed out at ,000 each and you're spending 0 a month on each card's minimum payment.
A consolidation loan may also be kind to your credit score down the road.
This works out to ,371.84 being paid in interest.
The monthly savings is 5.21, and over the life of the loan the amount of savings is ,765.04.
(In circumstances where you need actual debt relief or don't qualify for loans, it may be best to look into a debt settlement rather than, or in conjunction with, a debt consolidation.
Debt settlement aims to reduce your obligations rather than just reducing the number of creditors.