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First, let's get a real understand of what it is and what it isn't. According to good ole Wikipedia, debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process of individuals addressing high consumer debt, but occasionally it can also refer to a country's fiscal approach to consolidate corporate debt or government debt.
Let's focus on consumer debt for now! Debt consolidation is not a magic fix for your financial problems and your debt will not poof into thin air. If you don't address the underlying issues of how you got into debt in the first place (ie. impulsive buying, living above your means, "retail therapy", etc.) once you combine your debt you'll slowly start to accumulate more, because it's now readily available to use on your credit cards.
Debt consolidation is like putting a bandaid over a gaping festering wound
It works temporarily, but pretty soon it's going to get infected! Credit counseling and money management are just the antibiotic and gauze combination you need to spread on top of it to truly heal the wound.
While all of this is true, there are people who are able to control their spending habits and have just gotten into a sticky financial situation or went through a financial transition that are now over leveraged (their debt outweighs their income). So, here's my honest and true referral!
I've personally used SoFi for a personal loan and I can honestly say that I love working with them! They're very informed, great customer service, and they work with you if you're going through a financial transition and need to lower your payments to lessen the blow. I had to do this myself when I began my transition from a 9-5er to a full time entrepreneur.
The biggest reasons why I usually don't advocate for Debt Consolidation is:
It doesn't solve your overall financial issues
The monthly payments remain the same regardless of how much extra money you put towards it each month
They have much higher interest rates than credit cards (yes even if you have good credit)
Here's my suggestion for alternatives to try BEFORE you get a debt consolidation loan:
Balance transfer credit cards allow you to move money from one credit card to another for a small fee. They often have 0% APR for 12-18 months depending on the offer (YES even after you've used the introductory offer)
Contact your credit card company and ask them to move your due date closer to when your actual pay date so you no longer get late fees
Contact your credit card company and ask them to reduce your APR. Especially if you've been a loyal good customer for several years
Contact your credit card company and request a grace period. Remember there are PEOPLE at the other end of the phone. They may sympathize and ofter a repayment program that works for your current situation
If you've exhausted all of these options and STILL need a debt consolidation loan I definitely recommend checking out SoFi.
Schedule your Financial Physical™️ today to ensure you actually get out of debt and stay out of bad debt with our 12 month (WEEKLY) debt payoff plan!
And remember, If it cost your PEACE...it's TOO EXPENSIVE!
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