Ask Stacy: Should I Get a Debt Consolidation Loan?

One way to get ahead of debt is to borrow in the form of a debt consolidation loan. But before you go down this road, there's something you need to do first.

Ask Stacy: Should I Get a Debt Consolidation Loan? Photo by joyb0218 / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers. You can learn how to send in a question of your own below.

If you’re not typically a video watcher, give it a try. These videos are short and painless, and you’ll learn something valuable. But if you can’t deal with video, no problem: Just scroll down this page for the full transcript of the video, as well as some reader resources.

Today’s question is about finding help with debt; specifically, getting a debt consolidation loan.

Destroying debt is a subject I know a lot about. It was the subject of and many of my TV news stories. Over the years, I’ve also served as a board member for a couple of nonprofit credit-counseling agencies.

So how do you find a loan to help you pay off debt? Here’s my advice.

For more information on this topic, check out “Ask Stacy: My Credit Card Debt Is Killing Me — What Can I Do?” and “Ready to Tackle Your Debt? 12 Tips to Find Free or Cheap Help.” You can also go to the search at the top of this page, put in the word “debt” and find plenty of information on just about everything relating to this topic.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hi, everyone! Welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, coming to you from sunny Fort Lauderdale, Florida.

This question is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Ready for the question? Here we go. This comes from Cheryl. Cheryl says:

“I’m interested in obtaining a consolidation loan. I’d like to pay it off in about three years or less. Can you recommend the best lending institutions that I should consider?”

Cheryl, the first thing I’ve got to ask is if you’re putting a Band-Aid on a gaping wound. What I mean is, why do you need a consolidation loan in the first place? Why do you have so much debt? If your debt is the result of something like a layoff, or an illness, or some other one-time event, great. But if it’s coming from spending more than you make — if you’re living beyond your means — the first thing you need isn’t a loan; it’s to figure out where these spending leaks are and plug them.

Getting a debt consolidation loan is a short-term solution. But if you continually spend more than you make, you’re going to end up in the same place. That place, ultimately, is going to be bankruptcy court.

There are places you can go for debt help. Example? The debt page of our Solutions Center. Here, you’ll find free, expert help.

Now, let’s get back to your specific question, which was where can you go for a debt consolidation loan? I’m going to give you a few suggestions.

You can go to a credit union where you’ll often find lower rates than you will at commercial banks. This is because they’re not-for-profit.

You might also try a debt consolidation loan company by doing an online search for debt consolidation. But I want you to be very careful. There are a lot of shady operators out there. Make sure you read the fine print before you do anything with any company and make sure you read reviews.

One more thing you might consider, a little more off the grid: Peer-to-peer lending from sites like Lending Club and Prosper. (You can also find these in our Solutions Center.) They commonly offer three-year loans, which is what you said you wanted.

The better your credit is, the lower your interest rate is going to be. But you’ll likely find rates below what other sources are charging. As I speak, for example, Lending Club has rates as low as 6 percent for those with excellent credit.

Cheryl, I hope that answers your question. Now, let’s close with our quote of the day. This one comes from Carlos Ruiz Zafón:

“Making money isn’t hard in itself. What’s hard is to earn it doing something worth devoting one’s life to.”

Let’s live by that today, guys. Make it a profitable one and meet me right here next time!

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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Localpizzadeliverywalledlakemi.info in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

Got any words of wisdom you can offer on today’s question? Share your knowledge and experiences on our. And if you find this information useful, please share it!

Got more money questions? Browse lots more Ask Stacy answers here.

Stacy Johnson
Stacy Johnson
I'm the founder of Localpizzadeliverywalledlakemi.info and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

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