Debt Consolidation And Home Equity Loans As Credit Card Debt Reduction Solution?
Is going to your local bank and getting a home equity line of credit or some other type of debt consolidation loan a good idea? You will get many differing opinions from many experts in the field. Many say that it is not a good idea because the men and women in debt fail to change their extravagant spending habits and will have new debt on top of the old original debt.
I believe that although this can happen to many people, that some people will actually benefit from this strategy as a debt reduction solution. I have a couple of reasons for this.. the first being psychological.
There is a great feeling when you wipe the slate clean and start new behaviors from this new slate. For example, having 10 different credit card statements coming in every month does not feel good at all. It can create emotions within us that may create despair and powerlessness. This is hardly going to motivate us to change our behaviors.
Having one loan to pay monthly while beginning a new savings plan for emergencies feels fresher, newer, and more inviting for healthier spending behaviors and patterns to take place.
The second reason that I believe in consolidation loans for men and women in debt is for interest rate relief. Paying 5 percent interest on your loan, vs. 20 percent interest on your credit cards is big. The savings is enormous and is even larger if you have a lot of debt to consolidate.
Changing spending behaviors is an absolute MUST is you are going to consolidate credit card debt with the above debt reduction solutions.
Cutting up credit cards or putting them in a safe deposit for emergencies must happen before embarking in this type of debt reduction strategy.
Lastly, I would like to say that you must shop around for reputable banks and reputable debt reduction companies. Consumer Credit Counseling (www.nfcc.org) is a non-profit company that can help send you in the right direction.
Michelle Tukachinsky
Article Author :Michelle_Tukachinsky
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