It's that time again folks. Time for me to bug Eddie with another question I'm too lazy to google. I often come across terms I've been hearing forever but never actually knew the definition of. What is this you speak of? Is this good or bad? Should I be doing this? One of those terms is debt consolidation. So I must know. Let's get to it.
Why would someone opt for debt consolidation? Is this a good option or a bad option?
Typically debt consolidation is a good idea when you have several different lines of credit outstanding at once. The goal with debt consolidation is to get organized in order to pay down the outstanding balance more efficiently. Payments can be overlooked, missed or late when you have several to keep track of. This can lead to additional penalties and fees which further dig you into a deeper hole.
When looking to consolidate debt, you want to be sure that the new interest rate you’re being charged is lower than the other lines of credit you have outstanding. Often times credit cards will allow you to transfer balances to a new card with a zero or low introductory rate. In this case, be sure you pay down the debt before that introductory period expires otherwise you’ll be hit with those deferred fees.
Bottom line: Debt consolidation - good if done right.