Does debt consolidation really help, or is it a rip-off?

  1. j.amie profile image59
    j.amieposted 7 years ago

    Does debt consolidation really help, or is it a rip-off?

  2. dashingscorpio profile image87
    dashingscorpioposted 7 years ago

    It depends on what your goal is.

    There are two types of consolidation.
    One is you roll everything you owe into one big loan similar to paying everything off with a home equity loan that has a low interest rate. (Your goal is to pay off everything you owe)
    If someone runs a  credit report it will still show that you owe the same amount of money. $50k in debt to one creditor or spread out over 10 debtors is still $50k.
    The advantage here is hopefully you will have a much lower interest payment on the debt. However your debt/income ratio remains the same.

    The other method which is sometimes called "consolidation" is really nothing more than contacting your creditors and negotiating lower payments, reduced interest,...etc

    Naturally business is pro debt consolidation because it means they will at least get some money out of you.
    Keep in mind going this route does not mean your creidt rating will not take a hit.

    However if your intention is to walk away from all debt than filing Chapter 7 may be the way to go.
    The down side is a BK may stay on your credit report for up to 10 years. You will want to contact a lawyer for advice.

    Best of luck!

  3. profile image47
    brainlara2011posted 6 years ago

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