April 24, 2008
How does debt consolidation work?
Debt consolidation means you are taking 2 or 3 credit cards, and "consolidating" them into one loan. Preferably you would take out a personal loan at an interest rate much lower then the rate your current cards are. You use the loan money to pay off your credit cards and than you make monthly payments to pay off your loan. Because of the lower interest rate, you should be able to get rid of your debt faster and with less expenses.
Just be aware of a major trap that many people make. STOP USING CREDIT until you get this loan paid off. I’ve seen many people go this route, only to once again charge up their now-empty credit card. Then they are twice the amount in debt, and end up filing for bankruptcy. Stop spending more than you have coming in (if at all possible).
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