Low Interest rates temp some consumers to take on additional debt to ease existing credit woes. The goal is to consolidate various higher-interest balances into one, easier-to-handle and less-costly loan payment.
"You're getting symptomatic relief, not a credit cure," say some credit counselors.
The approach of replacing several loans with one consolidation loan approach can take several forms. There are debt consolodation loans, balance transfers to a zero-percent credit card and home equity loans or lines of credit.
Most Americans who take out a home equity loan or other type of loan to pay off credit cards end up with the same (if not higher) debt load within two years.
These statistics underscore a major problem with debt consolodation: It feeds upon the tendencies that got you in trouble in the first place. By taking on yet another creditor, you're adding the proverbial fuel to the fire. In this case, it's your money that's burning.
Also, if you've taken on so much debt that you're looking for more as a solution, chances are you won't qualify for the very low interest rates you see advertised. Those generally go to people with stellar credit ratings and do need the money anyway.
However, if you're at the end of your credit rope or swear that this time you'll be more disciplined, debt consolidation may be something to consider despite its risks.
In our opinion it is best to allow a competent debt settlement attorney reduce your balance and monthly payment by negotiating with your creditors. Contact us for references of debt settlement lawyers with a good track record of reducing debts.
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