Consolidating debt good

Refinancing to consolidate debt will be of no benefit if you don't stop the other debt. It takes discipline to do this, but it is worth the effort.

If you spend more than you can afford, consolidating your debt will not improve financial situation.

When a counselor is knowledgeable and compassionate, these sessions can be enlightening and motivating. If he or she acts bored, judgmental or pushy, request a different counselor. First, the bulk of your balances should be in unsecured debts, such as credit and charge cards, personal loans and, sometimes, collection accounts.

If most of your liabilities include other types (tax debt, unpaid child support or old parking tickets, for instance), these plans won't help.

Second, you should be confident that you can pay not just for a month or two, but for years.

And third, you need to have just enough money for essential expenses, some savings and your debt. While you're on the plan, your payment remains constant.

Debt consolidation is a third-party payment system. Agencies range in quality so make sure you shop around. Most debt consolidation plans are structured the same way. They ensure member agencies pass rigorous standards set forth by the Council on Accreditation or another approved third party, and that their counselors pass a comprehensive certification program. Financial institutions don't give preferential treatment to any one organization, nonprofit or otherwise.Refinancing your house to consolidate your debt by paying off your credit card and other bills might sound appealing, but beware of the risks.You might trade several payments at high interest rates for one payment at lower interest, but that might not be your best choice. Their debt management plans can help you get back on track -- but they can also be unnecessary and even detrimental when done through a poorly run organization or for the wrong reasons. These agencies do not make loans, nor do they settle debts. With a debt management plan, you make one payment to the credit counseling agency, which distributes the money to your creditors until they are paid in full.You're taking cash out of the equity in your home to pay off your credit cards, but increasing the amount you owe on your home.

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