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Loan consolidation can be a way forward.

Updated on May 10, 2011

When to consider loan consolidation.

Last year a dear friend told me he was in debt and saw no way forward. He owed a huge credit card debt, a lot of it overdue and so he was really getting creamed by his bankers.

What broke the camel's back, so to speak, was his car developing expensive engine problems just after Xmas. He had spent up big on an overseas holiday as well. All of his last remaining credit was gone. All the other cards he owned had become bad debts that were being paid off, without access to credit on them..

If you have a dozen credit cards all hanging out at 20% or more interest rate, you may need a loan consolidation, but perversly you are unlikely to be able to do so unless you have solid income and a good credit rating.

For those who have not yet crashed their credit ranking, credit cards can be easy to transfer to a new card account at a very low rate for a period of time, as you probably know from watching their constant ads on TV to encourage you to move from one credit provider to a new one. The trick is to then pay them down and keep them down which means living within your means. Here is a calculator to enable you to see what your repayments would be if you consolidated all your debt under one loan.

If you are locked in to your expenses such as having a huge mortgage, then I suggest you employ the methods I suggest below on the other hub. It will show you a way to recover quickly, although it does involve care and research. The dilemma of debt needs a different approach if your major fixed expenses keep you broke, the hub below offers a very practical solution that will reduce debt quickly by providing extra income.Get it right and it works. Always

Lousy money managers.

Fortunately for my friend, despite being a lousy money manager, he is successful in his work and has a good steady income.

This made it relatively easy to get a loan for the full amount owed on all his cards...... eventually...

First he moved the credit on all his cards to a Citibank card with an introductory rate of just under 1% This was one of the many deals advertised by lots of the banks who advertise on TV.

With the super low interest rate he was able to make proper payments off the principal and get the ball rolling towards reducing his debt.

Before the honeymoon rate went back up to 22% on his new Citibank card he arranged to borrow the full amount from the bank at a negotiated 14%

His bank issued him with a debit card where he has to use his own money to make card purchases. He is back to living within his means now, and is debt free after repaying the bank for his consolidation loan. It all worked out rather well.

When you can't consolidate your debt.

Sometimes life can be harsh and leave us without assets to sell or income to pay our way out of debt, but nothing is ever impossible if you put your mind to financial survival. The best way to get money is with money, but you don;t need more than a few dollars to stay afloat if you can learn how to buy and sell your way out of debt.

Here are some tried and true ways to get money when you need it and how to do it. This is practical advice that works, not the usual bulldust!

The idea here is to be your own financier from the profit you make, so if you are starting with $100 you borrowed try to make it count by making sure you have at least 200% profit. I can regularly make more than that, even on cars. Again, it is in the knowledge of the market.

If you follow my instructions in the hub above to the letter, you can expect to make a very high profit margin from used goods by swapping markets when you buy and sell.

In other words, buying from one group and selling to another, but at the top end of the market where the margin is often highest. This is a practical way to pay off those cards if life has been dealing from below the deck.

Many good and clever people go broke and get in to debt. They are often well motivated to seek financial success but simply have not seen a real chance to do so for any of a hundred reasons..

With buying and selling, you are the one in control and only learning how to do it successfully stands in the way of making good money whenever you need it.

If you have debt and can't get a consolidation loan, start buying and selling. Read the hub link in blue above, it will only take a few minutes and you may have one of those aha! moments.


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    • earnestshub profile imageAUTHOR


      7 years ago from Melbourne Australia

      Thank you Hello, hello. It can be very difficult to get back on your feet after suffering from the indignity of hard financial times. That is why I wrote the second hub that I linked here explaining some simple ideas for getting back on our feet when we have nothing left and little hope of making money.

    • earnestshub profile imageAUTHOR


      7 years ago from Melbourne Australia

      Thank you for reading crystolite,

    • Hello, hello, profile image

      Hello, hello, 

      7 years ago from London, UK

      Thank you for trying to help. When you are at the bottom it is very hard to see the top or to get out of it.

    • crystolite profile image


      7 years ago from Houston TX

      Nice hub.thanks for sharing.

    • earnestshub profile imageAUTHOR


      7 years ago from Melbourne Australia

      Thank you Avamum, I see you are a financial adviser from one of my favorite countries Canada. I agree with you and Peter on this, refinancing will do nothing to improve the situation unless bad habits are changed.

      I do believe however that bad health and family emergencies can contribute to debt quickly, and these people may have very good spending patterns under normal circumstances.

      I do know one family who were helped by loan consolidation at such a time in their lives.

    • earnestshub profile imageAUTHOR


      7 years ago from Melbourne Australia

      Thank you Peter, you make a very important point, especially if a family have a background of bad spending habits as my friend had.

      His mother was wonderful in helping him take the huge step of changing to a debit card when he got his credit consolidated.

      I agree their are risks in taking out a lower payment longer term loan, but it is an opportunity to get debt free quicker when the interest is lower than the credit card rate by such a big margin.

      Of course if they carry on spending as they did, they will still be in trouble, but that is the hard truth of life.

      All a consolidation loan does is put order back in a life, it does nothing about the reason for the debt in the first place.

    • earnestshub profile imageAUTHOR


      7 years ago from Melbourne Australia

      Hi diogenese. The thing is, the lenders don't care. If income is available to pay the loan, they will provide financial products to suit this sort loan consolidation.

    • Avamum profile image

      Sarita Harbour 

      7 years ago from Yellowknife, Canada

      I agree, Peter. When I worked as a Senior Personal Banker there were many "repeat" consolidation customers. Unless a family changes their spending patterns, loan consolidation can have the effect of enabling financially dangerous habits.

    • Peter Owen profile image

      Peter Owen 

      7 years ago from West Hempstead, NY

      I would add that Loan consolidations can be dangerous since it does not solve the consumers primary problem, which is over-spending. Many people who consolidate see overall lower payments and think they can then spend more since they are under their maximum limits. It just compounds the problem.

    • profile image


      7 years ago

      Sounds it! bob


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