Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Are consolidation loans recommended if you have multiple credit cards?
If you have multiple credit cards with different rates on them, is it recommended to get a consolidation loan? Would that extend the debt for a longer period of time?
Joan Koonce, Ph.D:
expert info »
Whether or not a person should get a debt consolidation loan depends on a person's circumstances. If the person is struggling to pay all of their credit card debt and other expenses each month, a debt consolidation loan may be appropriate. If they choose to get the debt consolidation loan to pay off their credit cards, they should not use their credit cards to obtain additional debt. Otherwise, their situation will not improve and will probably get worse. In addition, the payment on a debt consolidation loan should be less than the total payments for all credit card debt. If not, then the person will continue to struggle to pay their debt. The length of the repayment period (time it takes to repay the debt) could be extended or shortened depending on the interest rate of the debt consolidation loan. If the person has only been paying the minimum payment on their credit cards, chances are the repayment period on the debt consolidation loan will be shorter.
Delores Lenzy - Jones, CPA, CIA:
expert info »
Absolutely. Would that extend the debt for a longer period of time? Not necessarily...some creditors will reduce or eliminate your debt.

[Editor’s Note: Additional information on the pros and cons of different forms of debt consolidation and other alternatives, such as debt management, can be found in “Debt consolidation: cure or continued credit problems?” at

The National Foundation for Credit Counseling website at is an excellent resource for information on credit counseling.]
Sharon P. Hardy, CFE:
expert info »
This would depend on the total amount of all the debt (i.e. principal and interest due) that's outstanding, collectively, on the credit cards, as well as factoring in the interest rate and monthly payments which are being remitted in regard to each applicable credit card. Most generally, a consolation loan, if the debtor is in a position to qualify for a loan that consolidates all the debt at a much lower interest rate than at the aggregated rate that's being paid collectively and would shorten the length of time of paying off all the related debt, most certainly would prove to be the most advantageous in the long run.

Great question and one I hear often! The idea of having one monthly payment at a low interest rate is attractive to most people. However, I have bad news for you - a good debt consolidation loan is hard to find. Credit cards have largely replaced traditional debt consolidation loans at most financial institutions. And if you have a substantial amount of debt already, lenders consider you high risk - even if you have always paid your bills on time.

What you have seen advertised as debt consolidation loans, or just debt consolidation, is probably not the kind of consolidation loan you have in mind, but more likely it is a credit counseling program, which does not consolidate your debt. The consolidation
loans that are available are usually at high interest rates and won't help you reach your goal of getting out of debt.

It sounds like you are struggling with multiple debts and need a plan for paying them off. A free
consultation with a reputable counseling agency is not a bad idea. It's confidential, you will
get some money management advice, and you should be able to leave there with a plan for addressing your debt.

An additional note

For more information about this topic, listen to the March 2008 Wi$eUp Teleconference, What Do I Do Now? Facing Financial Challenges in an Uncertain Economic Environment.