Could Getting A Debt Consolidation Loan Be Committing Financial
Lets say by pledging your house as collateral, the banks
gives you a debt consolidation loan and you pay off all your high interest credit
cards and loans. So far so good -- now you only have the loan
to pay off. BUT -- your credit cards now have no balance and inevitably,
you buy a few things here and there, and before you know it --
your credit cards are back at the limit. Now you have the 'dbt consolidation
loan' and the credit cards. Everybody says, "No that won't
happen to me" or "I'll never do that" but people
do this every day and end up worse off that when they started.
In a study of the efficacy
of debt consolidation loans, the FDIC concluded that "
consumers will increase credit card and other consumer debt after
a debt consolidation package is completed, thereby weakening their
ability to repay outstanding debts and increasing the likelihood