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Stuck in debt? You may need credit counseling instead of a loan

[Feb 4, 2011.]


A loan could be the solution to all your financial woes, right? Not necessarily. While a personal loan could help you consolidate debt and pay other expenses, no amount of money is going to solve poor financial habits that may be contributing to financial problems. If you are up to your ears in debt and can't see a way out, it may be time to consider credit counseling.

Moving balances from loan to loan

Using a personal loan for debt consolidation can work if you know what you're doing. Getting a loan with a lower interest rate than your current debt can help knock down the balance faster. Having lower monthly minimum payments can also help stretch your income further.

But be careful about shifting debt from loan to loan. Yes, it can make sense to move high-interest credit card debt to a lower interest personal loan if you can get one. But once the debt has been transferred do not go out and run up a new balance on that old credit card or you will find yourself in even deeper trouble. Constantly moving old debts to new credit lines is a temporary fix and it is important to find real solutions to get rid of debt for good.

Credit counseling can help with debt

That's where credit counseling can help. A credit counselor can work with you to put together a debt reduction plan that may or may not include the use of a debt consolidation loan. You also can receive help with putting together a budget as well as getting at the root of emotional or other issues that may be contributing to poor spending habits.

Get all the details before signing up

When choosing a debt counselor, find out if you get a free consultation before signing up. Some nonprofit counseling agencies charge a fee for services, but others may offer free help. Get a list of all services provided, such as classes that may be offered. Also, be skeptical of any debt counseling agency that requires you to sign up for some type of consolidation loan because it could be a scam.

Credit counseling has helped many people get back on track with their finances. Be honest with yourself and consider whether you need another loan at this point, or whether you need better money management skills.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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