You Can’t Borrow Your Way Out of Debt

We live in an age where you want things now and pay for them later. Sure, you may think that promotion is going to come through with a pay raise, or the nice bonus, but human nature is you will spend long before you acquire and that creates debt.

Because that “sure thing” sometimes doesn’t come through.

Here at NLRBFCU, we want our customers to be appropriately informed of the best ways to handle their finances. One of the best pieces of advice is don’t enter into a loan-consolidation agreement that stretches out the term of your loan, no matter how attractive the advertising pitch is. And that is precisely what it is: a pitch.

And 99% of the time those aren’t good for your finances.

This is the catch that they DON’T tell you about: Even if you obtain lower monthly payments, you’ll pay much more in interest over the full term of the loan. There is an exception. If you can get a reduction in the interest rate you’re paying on your current loans; loan consolidation makes sense.

Many people will consolidate the high-interest rate balances on their credit cards with a home equity loan with a lower interest rate. However, you should avoid these types of loans because what you are doing is taking unsecured debt and making it secured. You see, most Americans when they do a debt consolidation, just turn around and rack up the balances again on their credit cards.

This is one of the worst things you can do to yourself financially as you are on the road to personal bankruptcy. One option which you may have is looking at settlement funding companies to help get out of debt. Yes, there are parameters you must meet, but it is worth taking a long look at the possibility. Whichever route you choose, it is vital that you get credit counseling, so you don’t wind up in the same perilous position.

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Laura Bushnell is Editor in Chief for NLRBFCU and based in Boston. Previously, she held senior VP level positions in corporate finance and consumer financial planning firms.

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