Consolidating credit card debt good idea
There are two broad types of debt consolidation loans: secured and unsecured.
Secured loans are backed by an asset of the borrower’s, such as a house or a car, that works as collateral for the loan.
Theoretically, any use of one form of financing to pay off other debts is practicing debt consolidation.
However, there are specific instruments called debt consolidation loans, offered by creditors as part of a plan to borrowers who have difficulty managing the number or size of their outstanding debts.
Refinancing to consolidate debt will be of no benefit if you don't stop the other debt. It takes discipline to do this, but it is worth the effort.
If you spend more than you can afford, consolidating your debt will not improve financial situation.
Haring holds a Bachelor of Journalism from the University of Missouri.
Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones.
Refinancing is not really consolidating your debts.Your monthly payments on that loan will increase and you could lose your home if you default.You also are trading a debt which can be paid off at any time with one that carries interest for the life of the mortgage.Refinancing your house to consolidate your debt by paying off your credit card and other bills might sound appealing, but beware of the risks.You might trade several payments at high interest rates for one payment at lower interest, but that might not be your best choice.