Idea To Take Out A Bill Consolidation Loan?
Q: I need some advice to help us get out of credit card debt. We took out a large loan last year to do some work on our house. And we are able to pay over the minimum amount but the interest eats up most of that, and we can not put more that a few dollars in savings. Would it be a good idea to take out a bill consolidation loan?
A: -First thing is to put the credit cards away or cut them up till you get out of debt. A bill consolidation load would then be a good idea as long as the interest rate is a lot lower than the credit card's. - The only way to get out of debt is to consistently spend less than what you earn. If you are not there now, then nothing that you will do will help. Even if your debts were magically wiped out, you would just get back in debt right away. This is the big reason that I don't like debt consolidation loans. In many cases, it solves the cash flow problem today, but not the spending problem. People feel like they are out of debt, so they go on another spending binge, then end up with the same credit card debts again, plus now a consolidation loan to pay off. Even worse is the home equity consolidation. In this case, they end up in debt again, plus they stand to lose their house if they cannot make the now much higher monthly payments. Your only option is to go on a money diet. Quit spending money on anything that is not a life and death matter. Cancel the cable TV, health club, and don't buy pre-prepared food or eat out. You were naughty with your money, now this is your punishment. Put every penny you can to paying off your debt. Once you are out of debt, then you can start adding back some of the luxuries that you gave up, as long as it fits within your income. As