I see so many debt consolidation ads on the television that it drives me crazy. They target those that are buying homes or refinancing homes to consolidate their other loans and credit card bills into one lump sum. I would never recommend this even though it sounds great.
The idea of putting all of the money you owe into one payment is great. The problem is how much will that payment be. How many years will you have to pay on that consolidation loan? Will it ever actually be paid off? Your credit cards will appear in great standing since you paid them off to begin paying another lender. Your house payment will appear as though it is one huge sum despite the fact that your house is not worth as much as you borrowed.
When it comes to the time that you would like to sell your new home you may come across a problem with this debt consolidation loan. You will need to have paid the loan down a lot before trying to sell the home otherwise you will have to sell your home for a lot more than it is worth or lose money by selling it for more than you bought if for but not enough to pay back the other money tied in with the house. This will leave you with a debt that is still owed to the mortgage company.
Another problem that can happen once you consolidate is maxing out your credit cards again. People consolidate their debt and then find themselves running into problems and needing to use their credit cards to pay for things that have gone wrong with the car or house. Next thing you know, you are in a higher debt problem than you were before. Sometimes people just charge freely on their cards simply because it is paid off. If you decide to pay someone to help you consolidate they will take away all of your credit cards to prevent this problem from happening.
Debt consolidation is not for everyone. If you are strong enough to resist from charging up your credit cards again then you may want to consolidate. If you cannot resist from applying for more loans then stay away from debt consolidation. The point of using the debt consolidation loan is to limit your debt and allow you freedom to have more money to pay for things you may need without using a credit card. With more money available you can begin to invest in things that will help you earn more money. There are several things you will be able to do if you learn to be smart with your money. However, if you know you are going to spend and spend on the credit cards do not go for this loan.
