 TITLE: How to Get a Debt Consolidation Loan During a Recession CONTENT: How Debt Consolidation Loans Work\n---------------------------------\nAs the name implies, debt consolidation loans offer a way to consolidate your debts. They work like this: You apply for a new loan, use the money from that loan to pay off your debts, and then pay back the debt consolidation loan in monthly installments.\nSome debt consolidation loans are specifically created and marketed for that purpose, with lenders sending the money directly to your creditors. It's also common to simply use a personal loan to pay off debts and consolidate debt that way (if you go this route, pay your bills ASAP so you aren't tempted to spend the money elsewhere).\nConsolidating debt can have advantages in certain situations, and help you do the following:\n*   **Streamline your bills**: Consolidating debt eliminates the need to juggle multiple due dates, payments and interest rates. Not only could that reduce stress, but it could also improve your ability to budget for the future, since you'll know exactly what your monthly payment will be—and for how long you'll be paying it.\n*   **Free up some room in your budget**: In many cases, your total monthly payment will decrease due to a lower interest rate, extended repayment term or both. Personal loans tend to have a lower interest rate, on average, so consolidating high credit card balances can save you a considerable amount in interest charges.\n*   **Potentially increase credit scores**: Personal loans don't count toward your credit utilization ratio, which is a major factor in your credit scores. Using a personal loan to pay off a maxed-out credit card could help you improve your credit scores if it drastically reduces your credit utilization. Debt consolidation might also make it easier to pay your bills on time and avoid late payments from appearing on your report.\nThere are, however, some things to keep in mind when consolidating debt:\n*   **It could result in higher costs over time.** Debt consolidation loans can lower your monthly payments, but some may do so by extending the length of your repayment term. That means you'll ultimately pay more in interest over the life of your loan. Many personal loans also come with origination fees or prepayment penalties.\n*   **Lower credit scores may limit your options.** It's possible to get a debt consolidation loan with bad credit, but you might end up with an interest rate that's higher than your current debts. To avoid a surprise, try using Experian CreditMatch™ to get prequalifed for a debt consolidation loan.\n*   **Consolidation won't make your debt disappear.** Getting a debt consolidation loan won't address your debt other than shifting it to a new loan. You'll still be responsible for paying it off. Another thing: If you consolidate debt but don't change your behavior, you could end up putting more money on those now-empty credit cards—and be in a worse position than before. END