For anyone struggling to pay multiple creditors - all charging admin fees and credit life insurance and fluctuating interest rates - a debt consolidation loan may seem the perfect solution. One creditor, one payment every month equals one headache versus many. Right? If only it were that simple. If you don't have your wits about you, a debt consolidation loan can incur more expensive debt. Debt consolidation must result in a reduced total monthly debt repayment to credit providers, says Jeroen de Lijster, executive director of Edubond, which provides debt consolidation for government employees. "There needs to be a significant monthly cash-flow benefit to the client, without the client incurring more debt." Lenders can do this by negotiating a discount on your debts for early settlement and by offering you a lower simple average interest rate than you are paying your creditors. A simple average interest rate ignores the weighting of your various debts - whether you are paying 13% in...

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