Consolidating loans good or bad
It doesn’t address excessive spending habits that create debt in the first place.It’s also not the solution if you’re overwhelmed by debt and have no hope of paying it off even with reduced payments.You make a single payment to the agency, which pays creditors on your behalf.Typically you can’t use credit cards while participating, and a large percentage of participants don’t complete the plan.Conversely, making minimum payments on credit cards could mean months or years before they’re paid off, all while accruing more interest than the initial principal.If your debt load is small — you can pay it off within six months to a year at your current pace — and you’d save only a negligible amount by consolidating, don’t bother.
At the same time, there are always certain risks and downsides to any debt solution that you use.
More When consolidating debt, balance transfer cards let you shift over debts from other cards and charge no interest for a limited time.
Personal loans allow you to pay off your creditors yourself, or you can use a lender that sends money straight to your creditors.
More Debt consolidation can help your credit if it helps you make on-time payments or shrinks balances on revolving accounts, especially if credit card balances were near their limits.
Your credit may be hurt if you run up credit card balances again, close most or all of your remaining cards, or miss a payment on your debt consolidation loan.