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Can You Do Your Own Debt Consolidation, Or Do You Need Help?

To make a debt consolidation, you have to take your smaller and higher interest loans and replace them with loans at a lower interest rates, to reduce your monthly payments. First there are home equity loans- getting tougher to get with the falling prices in the housing market.

Dont forget that even at a low fixed interest rates, over 30 years, a home equity loan can accumulate a large amount of interest payments. Then there is borrowing from your IRA, or your other retirement fund. Then there are those cute special offers to get a new credit card, and pay no interest for the first six months or one year on balances transferred.

The general problem one confronts in debt management is distinguishing between investments and purchases that are consumed. For example, a car or truck is not an investment. Its value decreases rapidly and this is one of the leading reasons so many people on a budget just buy a relatively new car with cash they have saved up. That is, buy a two year old Honda for $12,000, instead of buying the new one for $24,000. Of course buying a house has become a strange world of tricks and mirrors. The prices of houses all over, have skyrocketed over the last five years. In some areas like San Francisco, Cal, and certain suburbs of Washington DC, house prices have almost tripled over the last 5 or 6 years. Nevertheless, a house is a physical asset, it must be maintained. If you buy an apartment or condo, there is a set maintenance fee you must pay.

So, although many debt consolidation plans, both with an agency and do-it-yourself include a home equity loan to consolidate debt, dont forget that owning a house has expenses too. If you buy consumer goods they quickly depreciate in value. Clothing is worth amount nothing after you have worn it and furniture is almost as bad. Youre better off in the long run paying off your entire credit card balance every month , so you dont end up with a backlog of debt. Another problem is though many consumer goods, like stereos, computers, kitchen items, etc are getting cheaper in a global economy, they are also often less durable. You need to pay extra for extended warrantees, which is an added expense.