Q: Does 'debt consolidation' mean taking out a loan?

A: Typically, the term "debt consolidation" is used in conjunction with the word "loan." For example, if you have numerous debts and obligations at a variety of interest rates and maturities, you might take out a debt consolidation loan for the purpose of paying off all of your existing debts, leaving you with only the new loan.

However, this is not always necessarily the case. "Debt consolidation" can also refer to the process credit counselors engage in, in which all of your loans are "consolidated" so that you only have to make one monthly payment. This is the primary feature of a debt management plan (DMP), and only having one check to make out each month can make things a lot easier on debt-ridden consumers.

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