Many people in Eugene and elsewhere will try anything to get out of debt before resorting to bankruptcy. While it is a good idea to reduce debt or eliminate it whenever possible, some debt-reduction methods can be more harmful than helpful over the long run.
Debt consolidation is a method used by countless people to put all their bills in one place and pay them down. It can be a great help to gather debt into one monthly payment, instead of having to keep track of multiple payments each month to several different creditors. It can also be an appealing idea to consolidate debt into a manageable payment, to be paid off in about five years. However, according to U.S. News, some of the debt consolidation options available may not be an ideal choice for those with financial struggles.
For example, many debt consolidation companies charge exorbitant fees up front or tack them on to the interest. The immediate results may include an easy monthly payment, but customers could end up paying hundreds of dollars more in interest in the following years. Others who are paying off their debt by consolidating may be tempted by the idea of getting more credit cards, without having learned how to properly manage their finances.
According to NerdWallet, debt consolidation can help if those who use the service are committed to becoming debt-free. Instead of signing on with a consolidating company, they may instead consider transferring their debt to a low-interest credit card, consulting with a credit counselor or filing for bankruptcy.