Debt consolidation is a blanket term that covers the different ways you can combine multiple payments and debts into one to help you get out of debt faster.
With proper debt consolidation, you are better positioned to save for a car down payment and keep up on the loan payments. You should also get a lower auto loan interest rate if you reduce debt and improve your credit score using this method.
Take a look at the following debt consolidation options so you know what’s available and have an easier time financing your auto loan.
Under the debt consolidation loan method, you take out a loan against a larger asset, such as your home, to pay off other high interest debts. The upside is that since your loan is secured by an asset, you’ll get a lower interest rate than you currently carry on debts you’re planning to pay off, such as credit cards. You also have just one monthly payment to make instead of multiple.
This method does carry a big risk. If you can’t make your payments, you could lose the asset securing the loan.
Debt Management Plans
A debt management program, usually offered by credit counseling organizations, aims to combine all your debts into one monthly payment while reducing interest and balances. The credit counselors work with your creditors to negotiate an affordable payment plan for you that satisfies everyone involved.
Note that if you don’t make payments on time, you could be dropped from the program, and this option may affect your credit score.