RICHMOND, Va. (WWBT) - Today we take a look at the ins and outs of debt consolidation.
Debt consolidation is taking out a loan to pay off all your creditors so you only have one payment to do with.
This might help your credit over time and just gives you one big payment instead of several smaller ones at different times during the month.
Debt management plans are where you pay a company to negotiate with your creditors to pay less or forgive some of the debt.
You might also consolidate all the debt into one eventual payment.
But financial coach with the Virginia Credit Union, Cherry Dale, says there are a few things to keep in mind if you go this route.
“Usually you’re going to be charged to do that from the debt management company so keep in mind there are fees associated with a debt management plan and it will also hurt your credit,” Dale said.
Dale says over time it might help you in the long run but initially because that entity is going to be negotiating a loss for the creditors it will impact your credit score.
She also says that often times people will consolidate that debt and go right back and use those credit cards which gets them into an even deeper debt situation.
So if you go this route, cut up the credit cards so you can’t use them again.
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