The consolidation of debt, which is making money borrowed from a lender to pay off outstanding debts, has the advantage that it starts to have a single debtor to whom will manage the monthly payments and money back if conveniently choose the cancellation system.

Important steps to consider if interested in the debt consolidation process:

* Add up the monthly payments on the accounts you want to consolidate. * Make a list of interest rates with each of your accounts, and set the average of this rate. * Call your creditors and request cancellation cash balances as of the date it intends to consolidate debts. * The sum of their balance of cancellation should be the initial starting amount for consolidation. View loan options. * The interest rate should be lower than average in their exercise of the previous calculation. * Take into consideration the term of the loan and planning. * Once you have consolidated their debts to avoid entering the same situation. Remember that controlling your finances is in yourself. This applies to individuals, who are now in the countries where there are certain terms that should be taken into account which are called “Toronto terms”, because they are words that were established in the World Economic Summit in Toronto in June1988. They were applied to the countries designated by the World Bank as “IDA-only” borrowers who had a very heavy debt, low per capital income and balance of payments problems. These countries should have strong structural adjustment programs supported by the INTERNATIONAL MONETARY FUND.

The fundamental principles of the Toronto terms are basically two: 1.- To define the terms of the debts of the development assistance. 2.- For the debt that is not development assistance, create the introduction of the conditions for payment.

The debt of the ODA is returned with a maturity of 25 years including 14 years of extension, the default interest will be lower than the initial rate. For debts other than Development Assistance, creditors can choose from a menu of 3 payment terms.

The first option is: 1/3 of the debt will be canceled and returned with a maturity of 14 years for the remaining amount (with 8 years of extension), the market will define the default interests.

Second option: 25 years for repayment with 14 years extension and the market will define the interest rate in case of default.

Option “C”: The same terms like the option “A”, but the default interest rates will be 3.5% points below the market rate set (according with the market and depending on the reductions)

On December 1991 the Paris Club agree to add some concessions for the countries with lower incomes plus the terms defined at the Toronto agreement that there are essentially 2 options to reduce debt, plus the option non concessional new conditions of Toronto. The option represents a 50% concession of forgiveness in present value terms in debt service payments, lowering the debt during the consolidation period. Additionally, it was agreed to establish a timetable for consideration of a potential debt reduction. Creditors have indicated willingness to consider restructuring the remaining time when the debt is canceled on a date not later than 3 or 4 years.

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