Does Debt Consolidation Work?

Video Transcript

"My name is Bill Rae, I'm with HBW of Florida. I've been in the finance field for well over 20 years and today we're going to talk about how debt consolidation works. Let me start off by warning you, there are many scams in the debt consolidation field and I know a lot of people may not want to hear that, but it is true. There is no magic pill, there is no white knight coming to save you. You got in trouble by overspending or loss of income and it's going to take a good plan to get out. There are many good non-profit consolidation companies that can help you, but in my opinion the average person can work their own way out if they simply take the time to plan. Debt consolidation or a debt consolidation loan simply means taking all your unsecured debt from various different people you owe it and putting it together in a new loan, paying it to one place. If that's possible and if you can do that, that could be advantageous to you. However usually most folks when they reach that point of thinking about debt consolidation have reached the point where they can't get a new loan to pay off the others. It isn't the end of the world. The first place you should talk with if you haven't already done it is call the people you already owe money to. See what plans they can work out. If that's not suitable, then make your own. But be very careful of companies charging you upfront to get you a new loan. Make sure you understand that a consolidation loan is like any other loan, the only difference is you're paying off existing debt for new debt. So like all contracts, you need to make sure that you understand what interest rate you're being charged and more importantly in that contract, how are they charging it? Is it a daily average? Is it an adjusted rate? Or is it a previous? Each and every one of these can impact what your true cost is on that consolidation loan. As in anything, the field is full of people trying to take advantage of your stressful situation. Take a deep breath, it's OK. With a little due diligence you can get yourself out. Speak to someone such as a counselor like myself or other non-profit organizations. My name is Bill Rae, I'm with HBW and I'm helping you build wealth."