Some consumers may consider debt consolidation loan as a way to help themselves get out of debt.
However, people should keep in mind that debt consolidation loan does not eliminate their debt. Rather, it transfers debt from one source to another. An example of debt consolidation loan would be to take out a home equity loan in order to pay off credit card debt and other loans. Often times, consumers may be able to get a better rate on the debt consolidation loan when compared to their other loans.
In a recent blog post for PBS’ Tavis Smiley program, Michelle Singletary noted that consumers may want to try and pay off their initial debts rather than transfer them.
“I would put the credit card cards away. I would redo my budget and look for any and all ways to cut my expenses,” Singletary said.
Some examples offered by Singletary for cutting down expenses include reducing cell phone plans or cutting back on the amount of times people eat out. Furthermore, consumers may consider picking up a second job for a time in order to help make ends meet.
When considering debt consolidation, consumers should keep in mind there is some risk involved, especially if they have gotten a secured loan by putting up their house as collateral. If the consumer isn’t able to pay off their debts, they could lose their home.
People should contact a nonprofit credit counseling agency to see what kind of help is available for their unique financial situation. A certified credit counselor can provide expert advice for free so you can find the right solution for your needs.