Dear Drowning in Debt,
There are many options for consolidating your debt. Whether you take a personal loan from your bank or credit union, or roll all your credit-card balances to a lower interest-rate credit card, or get a home equity loan to pay off your debts, the most important thing is to reduce your overall effective interest rate — not just your monthly out-of-pocket costs. If you're paying upwards of 15% on several credit cards, then consolidating your debt could save you a lot of cash by reducing the amount of interest charges you pay. Several Web sites offer a consolidation calculator to help you figure out just how much you could save.
Remember — consolidating your debts is not a cure-all. You are still in debt, what you have done by consolidating is combine it into a single pile. If you don't deal with the behavior that got you there in the first place, you're not solving the problem. You also need to change your spending habits so you will not end up with high debt levels again! Signed,
Your H.O.M.E. Expert
Helpful Links
Sites with More Information
To learn more about credit, visit the following sites:
FDIC Money Smart Program
Federal Reserve Board's Choosing a Credit Card
FTC's Credit Web site
National Foundation for Credit Counseling
These helpful links are also available in the Resources area.
Next Step
Now that you know the basics of credit, continue to Credit Reports and Credit Score to see how these are determined.