That Is Just About As Bad As Doing A Bankruptcy.
Q: I'm asking for a friend and she needs to get info about debt-consolidation. She's about 5000us$ in debt and if you could find any online-resources or phone-numbers that might help her I would be most grateful. (I'm swedish, so please excuse if my language fails from time to time) The most stuff I've found deals with 10000$+ debts and this is not really helpful...
A: I don't think I would bother for a $5K debt. Debt consolidation services normally lead to a major black mark on your credit record that is just about as bad as doing a bankruptcy. It is not worth that for just $5K. This debt is only about $100 a month for about 5 years. I would suggest trying to get the interest rate down, perhaps by shopping for a low interest credit card, home equity loan, or perhaps a personal loan at a credit union. Most people can get a little head start by looking around the house for a few things that they can sell on E-Bay or take to the local pawn shop. If a person cannot find $100 a month to pay off a bill, then they have to do something major like move to a less expensive home or sell the car and buy something cheaper. The big problem with debt consolidation is that any relief of special loans that you get ends up clearing off room on your credit cards, and many folks simply charge them back up. They then end up with the new loan, plus the same old credit card bills, and this time, with no place to go for help. Taking out a home equity loan is also an issue since it converts a short term debt into a long term loan. That $20 pizza that was charged will cost over $100 by the time the home equity loan is paid off. The original poster did not mention if his friend was current and solvent, or in deep do-do. That would be interesting to know. The key is that you have to earn more than you spend. Or put another way, you have to spend less than you earn. If this is not the case, then it doesn't matter what type of loan or interest rate you get, the path is downhill towards financial ruin.
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