Myth: Debt consolidation saves interest, and there’s one smaller payment.Truth: Debt consolidation is dangerous because it only treats the symptom.Doing so can potentially save hundreds or even thousands of dollars, and can help you pay down your card loans quicker.However, before consolidating one’s credit card debt, it’s important to understand all the strengths and weaknesses of the different options.
In other words, the good money habits for staying out of debt and building wealth aren’t there—their behavior hasn’t changed—so it’s extremely likely they will go right back into debt.
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Consumers burdened with credit card debt may be better off consolidating their outstanding balances with a single low-interest loan.
You can’t borrow your way out of debt in the same way you can’t get out of a hole by digging out the bottom.
Getting out of debt isn’t quick or easy, but it’s the first step to achieving lasting financial health. It simply means you’re taking out one loan to pay off a bunch of loans—or consolidating the debt to one payment.
As with all things in life, however, there are pros and cons to taking out yet another loan. (We’ll explain why below.) While there could be great benefits to taking on a personal loan to pay off credit cards, you will want to weigh those benefits against any drawbacks before making your decision.