The reason this can be helpful to people with a lot of debt is that it can solve three of the worst problems you face: 1) High interest rates Some types of debt (particularly credit cards) can have extremely high interest rates – up to 25% or more.
If you’re in that kind of situation, there’s a good chance your debt will grow faster than you can pay it off.
Consolidating debt with a loan could reduce your monthly payments and provide near term relief, but a lengthier term could mean paying more in total interest.
But the truth is the debt is still there, as are the habits that caused it—you just moved it!Myth: Debt consolidation saves interest, and there’s one smaller payment.Truth: Debt consolidation is dangerous because it only treats the symptom.If you’re in debt, you may have asked yourself: “Is debt consolidation a good idea?” In this post we’ll help you answer that question by explaining how a debt consolidation loan works, what the alternatives are, and describing when debt consolidation can help you and when it will not. You need all the information in order to make the best decision, so that you can turn your finances around as quickly and painlessly as possible. It’s a loan that allows you to pay off your current debts with a new loan that has different terms (usually from a different lender) than your current loans or credit cards.