Consolidating debt good
If an offer sounds too good to be true, it probably is.There are several different types of consumer debt.When researching consolidation plan options, you may come across what’s known as debt consolidation companies.Some of these debt consolidation companies are legitimate; according to the Consumer Financial Protection Bureau, however, others are incredibly risky.In general, debt consolidation entails rolling several unsecured debts, such as credit card balances, personal loans or medical bills, into one single bill that’s paid off with a loan.There are dozens of ways to go about consolidating debt, and some include transferring the debt to a zero or low-interest credit card, taking out a debt consolidation loan, applying for a home equity loan or paying back your debt through a debt repayment consolidation plan.
Other debt such as personal loans and auto loans are also a relatively common occurrence and can also be considered when consolidating your debt.
Try not to take the maximum amount of time possible to pay off your new loan, and come up with a plan to get out of debt in three to five years.
You’ll also want to read the fine print in order to avoid surprises such as a balance transfer fees or application fees.
In any case, the most important component of debt management is changing your behavior.
If you don't change your spending habits, neither consolidating your debts or using an accelerated debt payoff will work. That means if you have serious debt, you shouldn't be paying for cable television, etc.
You can use our Debt Consolidation Calculator to see how much money you can save. We'll assume you have 3 outstanding debts: Debt #1: $4,000 Mastercard Interest Rate: 15% Current Monthly Payment: $250 Debt #2: $18,000 Visa Card Interest Rate: 18% Current Monthly Payment: $600 Debt #3: $6,500 Discover Card Interest Rate: 13% Current Monthly Payment: $350 Now let's assume you can get a single new loan for your combined debt of $28,500, for 5 years, at an interest rate of 9%.