You see advertisements for it all the time -- "Get debt-free and lower your monthly payments! " Debt consolidation ads are as ubiquitous as diet pill ads and sometimes just as outlandish.
Despite the remarkable claims, debt consolidation isn't magic and doesn't really eliminate your debt (at least not immediately) because it involves getting new debt.
If you’re financially drowning, of course you can declare bankruptcy.
The problem is that bankruptcy is a serious derogatory mark on your credit.
Some people consider credit card debt bad and mortgage or student loan debt good.You’ll need a good to excellent credit score — above 690 — to qualify for most cards.Make a budget to pay off your debt by the end of the introductory period, because any remaining balance after that time will be subject to a regular credit card interest rate.Most issuers charge a balance transfer fee of around 3%, and some also charge an annual fee.Before you choose a card, calculate whether the interest you save over time will wipe out the cost of the fee.
And since debt consolidation is one option that many people with debt are curious about, today we’d like to tackle this question: How does debt consolidation work?