Debt consolidation combines several debts into one new loan, often with more favorable terms for the borrower. After you speak with a credit counselor or a financial advisor, debt consolidation may be feasible to improve your debt management strategy.
Some cautions when considering debt consolidation are:
- You have to change your habits. It works only if you also will reduce your spending and credit purchases.
- Taking out a home equity line of credit to consolidate debts puts your home on the line. Think carefully before you do this.
- Consolidating your debt can look like new debt on your credit history and can end up hurting your overall credit score.
- The total interest cost of your debt may increase if payments are spread over a longer time period.