When you see an advert that offers to consolidate your debts into a single payment, you may assume it is a new big loan (a consolidation loan).
That could be the case, but there is another way to consolidate debt repayments, and that is through the debt review process.
During debt review (the debt restructuring process we spoke about earlier) arrangements are made to pay less to your credit providers each month…but probably for a slightly longer time period. It’s cheaper each month, but takes longer, that’s the trade-off.
Since most people who enter debt review make use of a payment distribution agent or PDA, they are able to make one global payment toward all of their debts each month. This one big payment is split up into smaller payments by the Payment Distribution Agent each month and sent to the right accounts, with the right reference numbers and at the right time.
So, you as the consumer, make one big payment and it is much simpler to manage. You don’t have to worry about missing any accounts or paying the wrong amount on the wrong day or using the wrong reference number.
Because you only make one payment, it could be said that the many different payments you made before are now consolidated into one monthly debt repayment.
This is then done without taking on more debt. Rather, it is part of the debt review process.
So, the repayment part is consolidated and not the actual loans. Those still run in separate places, but the repayment side of things is handled by the PDA while you only make a single easy payment each month.
It’s a small difference but there is a difference.