by Charlotte Wood
(last updated February 21, 2009)
Once you're in debt it's hard to pull yourself out of it. Debt is often a spiraling process that leads you deeper and deeper into financial trouble. One of the problems with debt is one immersed in it, some find it difficult to extricate oneself out again; it's often a lose-lose situation. Fortunately there are certain ways to ease yourself out of this debt pit, one of which is a debt consolidation loan, but this needs to be approached with extreme caution. Either it can pull you out or drag you farther down.
A debt consolidation loan aims to get you out of debt by paradoxically putting you in more debt. An oxymoron of sorts, debt consolidation loans give you the money to pay back all your other creditors in one fell swoop and then you just work on paying back one lender. The problem with debt consolidation loans is the simple fact that it's another loan. You see consolidation loans advertised with ridiculously low interest rates, but the thing with that is you can only qualify for the low interest rate if you have good credit and if you're in significant debt you won't have good credit. Translation: high interest rate.
Sometimes consolidation loans of any kind (home equity loan, zero-percent credit cards etc.) are a viable option, but you need to go in with a new money management technique. These consolidation loans won't work if you don't change how you handle your money. The key to pulling yourself out of debt is managing your debt; consolidation loans can go one of two ways. They can help you manage your debt or they can disastrously increase your debt.
You also need to be careful about what consolidation route you take. You don't want anything with an outrageous interest rate and you want to be careful with what you risk. Home equity loans for example, leverage your home and if you default on that kind of consolidation loan, you lose your house. Eek! Before you sign on the dotted line of any debt consolidation loan, you should look into credit counseling and see what they suggest you do. Debt consolidation loans can be your ticket out of the red, but you need to approach with caution and make sure you're in control of your debt and money.
Buying a new home is always exciting, but sometimes finding that extra cash to fill the gap between selling the old and ...Discover More
Sometimes it seems like everybody and their dog wants to give you a loan. Here's how you can keep from getting stuck with ...Discover More
Whether you are new to the world of finance, or are simply trying to teach your children how to be fiscally responsible, ...Discover More