8 Ways to Consolidate Debt, Part 1

I'm not a big fan of debt consolidation loans since what usually happens is that they give the debtor a bit of breathing room that allows him/her to keep on spending at their current rate. A few months later, they are in more debt and in worse shape than ever. That's why I recommend such loans only when the root problem (usually rampant spending) is dealt with.

However, I realize that in many cases, consolidating debt may be the only option for a person who wants to get on solid financial ground without declaring bankruptcy. As such, I'm going to start a series on ideas for consolidating debt that I found at Market Watch. The ideas are from Greg Pahl, co-author of "The Unofficial Guide to Beating Debt," and Virginia Morris, co-author of "The Wall Street Journal Guide to Understanding Money & Investing," (one of the books I'm giving away free). Here's their first suggestion:

Credit card transfers. Rate surfing only makes sense if you can pay off your outstanding debt within the time frame of the low introductory rate. "By the time you do all the transferring, the introductory period is over," Pahl says. "I get this stuff in the mail a lot. You really have to read it carefully. The change of a word or two can change the whole thrust of the promotion."

I'd give this a 5 on a scale of 1-10. It's not a bad idea, but not great either -- though I've known people who've seemingly put off debts forever using this method. My final word is to heed their advice and read the fine print very, very carefully.

Click here to read part 2 of this series.

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Comments

[Alan Liew]

I thought there are less than 4 ways to consolidate debt and obviously I'm wrong. Thanks for the info.

[Kristie]

I have a question, if thats ok. I helped my daughter out when she had some money troubles and now she's having a hard time making the payment. She signed up with a comsumer credit agency but my credit score has already dropped from a 721 to a 655. Should i just refiance mu house with cash out and pay everyone off( about 52,000) or continue with consumer credit. She will pay either one, but I know shes having a hard time with the consumer credit payment of 1200.00. I just want these debts paid and for my credit not to be destroyed. Please help with some advice. Thanks

[Bill the Consolidation Guy]

While reading 8 Ways to Consolidate debt .. did you tell yourself to Find out if Consolidating Your Debt is Your Answer to Having More Cash in Your Pocket and a Happier Life!

Consolidating your debt is one way of putting more cash in your pocket that can have an immediate benefit for you without having to earn more money. Debt Consolidation Loans are used every day by the smartest money managers in the world, be it big or small business, or individuals with PHD's or house wives. So why would you not want to make more with what you have without having to earn more money? What is the secret? Consolidating Your Debt

[Susan]

What bothers me about debt consolidation are two things; 1) it doesn't really address the issue of spending more than you earn, and 2) does the fact that you've had to seek assistance with your debt versus pulling yourself up by your bootstraps and doing it the old-fashioned way, one day at a time and limiting your expenses down to the penny. It's been my experience that the only way I've learned a new habit is to suffer, which etches in my memory what I have learned from the ordeal. Otherwise, I may repeat it if I've been "saved."

[Steve "The Debt Settlement Man" B]

Great opening you couldn't have hit the nail on the head any better. I have spoke with countless amounts of people who have done just that. Get a debt consolidation loan, which leaves your cards paid off, but ready to be charged right back up with the high credit limit and all. Only next time you rack up your credit card debt your gonna have more secured debt and get put in a situation where bankruptcy might be the only last option. This happens to way to many people, the truth is in the spending habits. And the quick fix debt consolidation loan. Like anything else in like no pain no gain.

[Johnothan (Technocrates the Alchemist)]

Consolidation is all well and good for a method of debt reduction in some cases. However, if you have little or no income, nothing is going to stop debt accumulation or financial problems. Take heart though, because money is not everything. In fact, it has little to do with debt solutions, though most would disagree. It is only one tool. There are virtually no limits on the creativity of your mind. With it, there are no limits on resources or solutions. Economics often teaches you to worry about limited resources. In reality, long before a resource is exhausted, we don't need it any more. Imagine the things used 100 years ago. Some are still used today, but almost all have been replaced by better solutions. We went from a horse to an auto, so do we need horses? Certainly not for transportation. This is only one simple example. In today's world, the rate of change like this happens very fast. Some things change dramatically within a few days. Eventually this will happen in seconds. This is just food for thought and an offer of hope. Never give up and always remember, solutions to your problems are out there and will happen, but you must continually take action until you achieve it. Awaken to this simple truth and finally be truly free, whether it be debts, or any other thing you have been tied to.