Is Loan Consolidation a Bandaid?

Once upon a time there was a man that tried juggled knives.  Unfortunately he couldn’t quite manage it without cutting himself and bleeding horribly.   It got so bad that we was at risk of bleeding to death.   Would you advise him to stop playing with knives or just get a bigger bandage?  The man’s root problem wasn’t that he was bleeding- it was that he was playing with knives.  Is your debt really the root problem, or is there some other underlying problem?  Do you have a mortgage you can afford with your income?  Do you habitually overspend?  If you don’t deal with the root problem no bandage will stop the symptoms from reoccurring.   Once you have dealt with the root problem then deal with the debt.

Danger Ahead

I would proceed very cautiously, a quick Google search turned up a lot of horror stories- outright scams, bills being paid late, and fees increasing during repayment.  If you do go with a Loan Consolidation Company you need to be extraordinarily careful who you choose!

Alternatives

I thought of a few possible alternatives:

  • Get a consolidation loan from a credit union.  They generally have pretty good rates and great customer service not to mention it won’t be a scam!
  • Get a consolidation loan from a peer to peer lending site.   You may be able to get a lower rate.
  • Do a balance transfer to a lower rate card- be very careful about transfer conditions as many charge a transfer fee or change rates after a short time.
  • Negotiate the rates with your creditors- they may lower your rates if you just ask… especially if you mention you had been looking at the rates from another company.  It never hurts to ask for a lower rate.

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