What Is Debt Consolidation?
As of 2018, nearly 80% of Americans, across all generational demographics, carry some type of debt. Whether that debt comes from student loans, mortgages, credit card debt, auto loans or medical debt, more Americans are looking for ways to reduce their debt. Many debt-holders may have come across the suggestion to consolidate their debt as part of a strategy for becoming debt-free and wondered if debt consolidation is a good or a bad idea. It is a bad idea. New loans are not a good thing. CreditGUARD does not recommend debt consolidation loans.
What is Debt Consolidation and How Does it Work? 3 Options
Debt consolidation is the umbrella term for rolling all of your high-interest debts into one lower-interest payment by taking out a new loan.
CreditGUARD does not endorse this type of debt consolidation.
There are three primary ways of doing this: transferring all of your debts onto a 0% interest, balance-transfer credit card, or by obtaining a fixed-rate debt consolidation loan.
You can also consolidate debt by taking out a home equity loan or a loan on your 401(k), however these two options involve risk to both your home and/or your retirement.
CreditGUARD does not recommend this. Don’t take out new loans, balance transfers or leverage your retirement.
Options 1 & 2: Bad Deals for Debt Consolidation
The first and second options only work if you can pay off the balance in full during the promotional period.
We think it’s important to know how this works, but we don’t recommend it.
Always make sure to note the interest rate of the credit card to which you are transferring your balance, as you will accrue that interest on your balance if it is not paid off in full during the promotional period.
The last thing you want is to start accruing more debt on a high interest credit card if you can’t pay in full before the promotional date is up.
CreditGUARD does not recommend balance transfers or any new loans.
Option 3: CreditGUARD’s Safe Non Profit Debt Consolidation
The only safe way to consolidate your credit debt into a single payment without taking on a new loan or getting a new credit card (both of which are really dangerous) is to enroll in a program like CreditGUARD’s non profit debt management service. In this program, CreditGUARD’s certified credit counselors consult with you and your creditors to both put you on a budget, negotiate lowered interest rates and manage your debt repayments so that you pay one easy, low monthly amount.
This is better than traditional consolidation because you aren’t opening new accounts that can increase your debt. You’re really on a path to freedom.
Is Debt Consolidation A Good Choice For Me?
CreditGUARD does not offer debt consolidation loans.
Debt consolidation loans essentially clear a path for you to more than double your debt, especially when a low credit score makes it harder to obtain a favorable interest rate, defeating the purpose of consolidating your debt altogether.
Avoid debt consolidation loans at all costs.
Look for Help
Contacting a credit counselor who can offer objective advice can be helpful in figuring out what is best for your financial goals.
Our CreditGUARD counselors are dedicated to helping you figure out the best way to get out of debt.
As a non-profit organization, our counselors are highly trained and certified to help you figure out your next step toward financial freedom. Ask us about our nonprofit alternative to debt consolidation loans when you call one of our certified credit counselors today.