Debt consolidation is one of the most popular topics on the web. Nearly everyone has debt and nearly everyone has debt in more than one place. So why not consolidate all that debt into one payment to one place? Obviously the benefits are many. You get the added advantage of having only one payment, possibly a lower interest rate, and perhaps get to pay it all off earlier.
There are of course a few pitfalls that one must avoid when considering debt consolidation.
- Will you be able to avoid adding more debt?
- Increased interest rates
- new payment is too high
Other things to avoid are tying a secured debt and unsecured debt together. Often times, people will use a home equity loan to eliminate the credit card debt. The important thing to remember about doing so is that if you default on that loan, forclosure probably isn’t far off. The same goes for refinancing your car loan. The number one cause of failure in those that consolidate their debt is the aquisition of new debt. Many people find themselves drowning in debt when this happens.
So is consolidation for you? Generally, if you can avoid the addition of new debt and the tying together of secured and unsecured debt, it probably isn’t a bad idea.