Consolidating debt bad or good
Check our debt payoff guide to further assess your options.
There are two primary ways to consolidate debt, both of which concentrate your debt payments into one monthly bill: Consolidate your debt if you can get a loan at better terms and/or it will assist you in making payments on time.
Here are the downsides of debt consolidation, in general: Although all debt consolidation works in largely the same way, there are several different methods you can use that do the same thing.
The different methods of debt consolidation have benefits and risks associated with each specific option, so it’s important to understand these so you can decide which way is the right way to consolidate for you.
You also get the added bonus of financial education and support from a certified credit counseling service so there’s a lot to gain from a DMP.
The only real downside is that your accounts are frozen while you’re enrolled, so you have to learn to live without your credit cards – but on the other hand, is that really a bad thing considering your credit cards are what got you into this situation in the first place?
In any case, the best option for you depends on your credit score and profile, as well as your debt-to-income ratio.Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.More Two additional ways to consolidate debt are taking out a home equity loan or 401(k) loan.The following chart can help you understand the upsides and downsides to the different options available for debt consolidation: In a basic sense, a balance transfer is usually a viable option for anyone with excellent credit score who catches their debt problem early.The biggest downside is the higher fees you usually face for the transfers.