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What to look for when consolidating debt

You may commit to a secured or unsecured loan, transfer outstanding debt onto a new or existing line of credit, or pool your debt on a balance transfer credit card.

Debt settlement and debt management plans are other options.

A debt management plan is an agreement between you, your creditors and a nonprofit credit counseling organization.

Your credit counselor works with creditors to consolidate the full amount of your loans at a lower interest rate or for a longer repayment period (three to five years usually).

When you’re drowning in due dates, debt consolidation can sound like a godsend.

A credit card balance transfer, for example, will likely cost 3-5 percent of the amount of money transferred onto the new card.

“If you haven’t changed any habits, you can guarantee you’ll be right back in debt in a matter of months,” Lewis says.

“This is about changing behavior and making sacrifices.” Don’t gloss over your previous actions.

“But consolidation is just a temporary bandage for a bigger problem.” “It’s a tool and it’s not step one because nothing has changed,” agrees Carol Lewis, a certified financial planner who specializes in helping consumers get out of debt.

“By itself, debt consolidation won’t do anything for you.” Tread carefully, the experts say, or you could end up in more financial trouble.

You make your payments to the agency and usually pay a small fee (max $50 a month).

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What to look for when consolidating debt introduction

What to look for when consolidating debt