Is Debt Consolidation Bad?

If you have found yourself in company with the thousands of people every year who owe more money to creditors than you can pay back, you have several options for climbing out from under that heavy burden.  If you're asking yourself  “Is Debt Consolidation Bad?”, you may be pleasantly surprised at the options available to you. Your options are more plentiful if you are homeowner and have equity in your home. 

A home equity loan is one place to start.  You can get a decently low interest rate and a pretty good choice of repayment options.  The only real trouble with a home equity loan is that you extend the time that you are paying on your home by as much as thirty years.  Not only are you going to end up paying longer, but you'll have loan origination fees and points to pay along with title insurance and appraisal fees. 

You could refinance your home loan into a fixed rate mortgage, which might lower your payments, but again, it twill stretch out your loan by about 15 to 30 years.  If you do go for this option, do it once and only once, since the interest payments accrued over the life of the loan can really add up.

One alternative that has been gaining in popularity over the last several years is debt consolidation.  Consolidation services will total up your entire debt to all creditors and work as an intermediary to negotiate lower interest rates and a more manageable repayment schedule.  So if you've ever seen an advertisement for such a service and wondered, “Is debt consolidation bad?” , the answer in the long run is probably no. 

Sure, entering into a debt consolidation agreement goes on your credit report and doesn't always look good, but it certainly looks better than a bankruptcy or loan defaults.  One thing about debt consolidation that turns some people off is the fact that you have to close all the accounts that you include in the agreement.  Most consolidation companies require you to let them know before you apply for new credit, so they can advise you of your best options. 

Switching to a cash lifestyle is very difficult at first, but it can be done, and it is done by scores of people just like you every day.  Still, many are willing to sacrifice their credit pillow for the peace of mind that comes with a drastic reduction in monthly cash outlay.  In some cases, you can even see as much as a 50% reduction in your monthly payments. 

Balancing the benefits with the risks and downsides of several options can be a daunting task, but it is always worth the effort to try.  Debt consolidation is probably the best option for anybody who simply can't repay the debt they owe.  The transition to a cash lifestyle is difficult, but with the savings you can get from the lowered monthly payments, you're already well on your way to financial stability once again.  It's a long road for sure, but staying on it is the best financial decision you could possibly make. Instead of wasting your time wondering “Is Debt Consolidation Bad”, take the steps you need to begin getting out of debt today.

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