Sarah Rathner

speaker

124 appearances 2 recordings 1 series first heard Dec 2022 last heard Feb 2023

Sarah Rathner’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · How Debt Consolidation Works and Downsides to Watch Out For · 29 Dec 2022 podcast

But it very likely will be

lower interest than what you would be paying with your credit card.

Not necessarily, but it can.

What's also important when considering loan consolidation or debt consolidation is also addressing the root cause of the debt in the first place.

Because debt often can be the cause of one single major expense, like an unexpected medical bill or a car repair.

And if that puts you in debt and then you take some time to pay that off,

Okay, then debt consolidation can be very helpful because it will make borrowing that sum of money less expensive.

But if you have ongoing issues with debt and ongoing issues with spending and you're hopping from one personal loan to the next or one balance transfer card to the next, you're not really addressing the root cause of your debt.

And so debt consolidation essentially becomes a band-aid.

It doesn't become the solution to your problem.

And that's where working with a credit counseling professional, you want to look for a nonprofit credit counseling organization to help you.

That's where that can be very beneficial because not only are they helping you with the nuts and bolts of your debt, with the numbers, with the math, but they're also helping you with that component that's more emotional.

And that can give you a greater chance of success if you're trying to get out of debt and then stay out of debt for good.

Yes.

So with balance transfer credit cards, it's pretty typical to pay a fee of 3% to 5% of your transferred balance.

So that's something to budget for and keep in mind.

Personal loans, it's not so much about a fee for applying, but you should also just keep in mind that whenever you apply for any sort of new loan or credit card, it is going to temporarily expire.

ding your credit score by a couple of points.

So if you are thinking of maybe applying for a mortgage in the near future or something like that, applying for a new credit card can make it a little bit more difficult to go through the underwriting process.

You'll have more stuff to explain away with your loan officer, and that's just something to keep in mind.

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