To the person drowning in debt, a debt-consolidation loan looks like a lifesaver. But reaching for it without knowing exactly what it’s made of could be a severe mistake.
The way it’s supposed to work: You pay off all your small high-interest consumer debts with the proceeds of a new low-interest loan whose payment is less than the total of the smaller payments.
In theory, consolidation is a terrific solution for a burdensome debt situation. In reality, it can force you into even more treacherous waters.
There are three ways to consolidate:
No. 1: A new low-interest signature (unsecured) loan from an individual, bank or credit union. If you can get it, this type of debt consolidation is ideal….