Does debt consolidation save you money

[britfish]

Will consolidating our three small debts together save us money? Does it pay off the balance quicker or just combine them to make the payment lower and therefore the timeframe longer. The interest rates are all 6-7%.

 

[erincon23]

There's no easy answer to this. Depends on how you do the consolidation -- if you take a home equity loan and pay through that, maybe. But BEWARE of debt consolidation companies -- many of them are scams. Don't EVEN TALK to anyone who says to pay them directly and they'll make the payments, especially if it's a company that says it can get your total amount owed reduced for you -- often , they keep the money you send them and never make your payments. Honestly, you're better off just taking care of it yourself. You have very low interest rates, and if they're small debts, just pay them off as quickly as you can and be done with it. I wouldn't even think about debt consolidation with your interest rates -- with high interest, maybe.

 

[bellarella]

You'll have to do the math on this.

If you are consolidating high interest rate debt into a lower interest rate loan, then it can save you money as long as you aren't stretching the payments out longer and as long as there is no prepayment penalties involved.

Be wary if you are looking to transfer unsecured debt (like credit cards) into secured debt (like a mortgage or HELOC).

Also, read fine print. Sometimes transfers have teaser rates or clauses where, if you miss or are late with a payment, the interest rate will jump.

Sorry there is no one-size-fits-all answer.

 

[dd50]

Usually they are a bad idea. I don't know any one that used them that got a positive experience.

I would just keep them like they are and pay them off because you have some good rates and you don't want to end up with much higher rates if you go the debt consolidation way.

 

[Princesca]

Usually not recommended. Usually, with a little time and effort on your part, you can accomplish what they would do for you, on your own.

In terms of dealing with debt, I'm a big fan of Dave Ramsey's Total Money Makeover.

 

[timmac]

Will consolidating our three small debts together save us money? Does it pay off the balance quicker or just combine them to make the payment lower and therefore the timeframe longer. The interest rates are all 6-7%.

6-7% is a rather low interest rate already. I don't think you're likely to do much better than that in any scenario except possibly a home equity loan; but even then, the difference isn't much, and is probably not worth putting your house on the line for it.

 

[MedicGoofy]

I did debt consolidation about two years ago. Biggest mistake of my life.

I have no idea the difference between consolidation in Canada and the US, there seems to be major differences when it comes to financial things BUT I can tell you.....I don't care what your interest rate is or how much you owe that you want to consolidate....it can potentially ruin you.

I had a moderate amount to consolidate, with a higher interest rate (after my rate jumped from 8% to 19.5% because of just making the minimum payments I became high risk). I consolidated. I was making the regular payments which WERE going to my creditors....proven to me by statements given to me monthly from the creditors which were recieving the money.

Problems arised when I wanted to purchase my first house.....couldn't. Had no credit. In fact, I was (forgetting the term used) on the government list or whatever......not good. BECAUSE of the debt consolidation. Had nothing to do with the fact I owed money to different creditors/lendors...I had been making minimum payments which didn't put me in the red. I could of kept doing that for YEARS!!!! But didnt want to. The credit consolidation company made it sound like this was the best way to go, it wouldn't effect me, that once it was paid off I would be free to live life like nothing happened.

From my financial planner and multiple banks, I am screwed for years to come. My credit score is so low that I am told I would of been much better claiming bankruptcy. Much better.

SO, my advice, do whatever you can NOT to use debt consolidation. I would of NEVER have done it knowing what I know now.

Frustrating part is, I have an amazing paying job with job stability. I suffered an off work injury that put me into unemployment pay because I went past the sick plan my employer offers. My pay was cut into less than 1/4 of what I normally make due to Canadian unemployment regulations. It was crap. Cost of living = racked up debt. And some stupidity on my part.

I understand that it is different between Canada and the US. BUT KNOW YOUR FACTS BEFORE YOU DO IT!!!!!!! Learn from my mistakes

 

[AmandaRG]

Make minimum payments on the larger 2, and pay everything you can on the smallest one. As soon as it is paid off, take what you had been paying on the first one and add it to the next smallest. Look for all the extra $$ you can (cut back on eating out, movies, etc.) and get them knocked out. It is great when you can do this.

One of the problems with consolidating is that often they are credit cards and get charged right back up instead of truly reducing the debt.

 

[britfish]

Make minimum payments on the larger 2, and pay everything you can on the smallest one. As soon as it is paid off, take what you had been paying on the first one and add it to the next smallest. Look for all the extra $$ you can (cut back on eating out, movies, etc.) and get them knocked out. It is great when you can do this.

One of the problems with consolidating is that often they are credit cards and get charged right back up instead of truly reducing the debt.

That sounds like a good idea, I've been paying a little extra on each but they just don't seem to be budging. I think I'll work on the lowest first like you suggested.