January 13, 2016
Debt consolidation
Dear Consumer Ed:
What is the right approach for debt consolidation? Is it a good thing to do? How do I find a reputable company?
Consumer Ed says:
Whether debt consolidation is right for you, and which approach you should take, depends on a number of factors. Debt consolidation involves transferring multiple loans into a single loan – your various debts, whether they are credit card bills or loan payments, are rolled into one monthly payment. Someone who qualifies for consolidation may receive:
Lower interest rates — Extending the principal balance over a longer period of time allows a lender assuming multiple loans to reduce interest rates on the larger loan while still collecting an adequate amount toward the principal owed.
Lower monthly payments — By consolidating high interest debts into one lower interest rate, you will owe less each month.
An improved credit score — If your credit score has suffered because of longstanding debt, your ability to make monthly payments over a long period of time can help raise it over time.
Unfortunately, there are many companies that take advantage of people trying to solve their debt problems by charging them excessive fees, not paying creditors in a timely manner, and actually worsening debt problems. So take care in choosing a debt adjustment company. To locate a reputable company in your area, contact the National Foundation for Credit Counseling at 800-388-2227 or www.nfcc.org.