subject: Should You Consolidate Your Debt? [print this page] Should You Consolidate Your Debt? Should You Consolidate Your Debt?
Should You Consolidate Your Debt?
First, unless the problems that created the need for a consolidation loan are corrected, you may well find yourself worse off in the long run. For instance, ifthe-debt was created by overspending on a monthly basis, theconsolidation loan won't solve that problem.It will only delay the Until the problem of overspending is solved, no consolidation loans should ever be considered. Otherwise a year or so later all the little bills will be back again, and when they are combined with the consolidation loan, the situation will be worse.When someone consolidates he borrows more than what is needed to pay theoutstanding bills. The purchases may actually be needed items such as a refrigerator, a washing machine, or a car.
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What's wrong with that? Nothing, as long as the individual has disciplined himself and saved the money to buy those things. But for those who already have discipline problems, it's just one more way to splurge.
In our generation there are almost limitless temptations to spend. Thousands of people actually make their living thinking of new ways to lend money and collect interest. Perhaps the most common method of consolidating in the late eighties is through home equity loans. Since the '86 Tax Reform Act made home loans virtually the only interest deductible on income tax- es, more and more people have turned to home equity loans for consolidating.
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