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

Should I apply for a loan to pay off all my debt and leave me with one monthly payment?
I'm thinking of applying for a loan that would be used to pay off all my debt and leave me with one monthly payment. I may be getting divorced. I want to clear up my credit and lower my expenses in case I have to start over (we have children). What are your thoughts? Please advise.
Pablo M. Bianchi, CFP:
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Great question--one that involves both legal and financial issues. Let me begin by saying that in theory your thinking process is correct, but here are some things that I would like for you to think about.

1) Are you the only person responsible for the debt? Is your spouse responsible for half of the debt? Most likely yes.
2) If you are going to get divorced I will recommend that you begin, if possible, to stash some monies into a place that is not accessible to your spouse. You’re entitled to gift up to $13,000 in 2010 to any one person. It is understood that you will want to gift these monies to someone that will gift the monies back to you in a time of need. (This is the area that you should consult with an attorney [about].) The idea here is that you can put some money aside to help you with your potential move, rental of a new place, and a future emergency.
3) My concern always when I hear your strategy is that often you will use this strategy to pay off multiple credit cards. The problem is what I often see is that 18 months later most people have one large loan and they have maxed out the credit cards again. I don't know if that will be you, but please be aware of this type of trap.
Frank Wells:
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Converting all debt to one loan does not address the need to review existing debt and interest rates on those. It will save time in payment, but the rate matters more in wise use of your money. You may also consider the term of all loans in your review. has loan calculators and other tools to help.
Delores Lenzy - Jones, CPA, CIA:
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Consolidating debt is always better than paying numerous single payments. Also, having a strong credit standing is helpful in order to buy a house, acquire household goods, etc. You're taking the right approach.
Michael A. Masiello:
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Caution: are you consolidating joint debts? How will they be split if divorced? While I admire the desire to reduce debt, please be careful. Check the credentials of the consolidation company or group. Is it legit or a scam co. with higher penalties and interest rates? Suggest you contact National Foundation for Credit Counseling (, a not-for-profit, to get advice and input on your situation. By the way, I have no affiliation with them. I just know they are a legit credit counseling co. Feel free to contact me if you want more info. Good Luck. Mike
Suzanne Kincaid:
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This is a great idea, especially when it lowers your overall monthly payments. Good for you and Best Wishes!
Editor's Note:
One source of information you might wish to consult is the book Think $ingle! By Janet Bodnar, who was a speaker on the Wi$eUp teleconference call on “Facing a Financial Crisis, Part II” on November 30, 2005 (which is posted on the Wi$eUp Web site). Her book has a chapter on Divorce: Get a Fair Deal, which has a section entitled “Get Rid of Joint Debt.” You might also be interested to know that there are Certified Divorce Financial Analysts, who are members of the Institute for Divorce Financial Analysts ( and who specialize in the financial issues surrounding divorce.
Martina A. Jimenez:
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You should talk to a financial adviser before making these consolidations! You must look at the interest rate for this new loan and the payoff terms (compare to existing accounts interest rates). You should also talk to your divorce attorney about joint debts and how you are going to divide the debts in your divorce agreement.

Make sure you find out more about the consolidation terms (is it a debt consolidation that will affect your credit?). Best regards.
Gerri Detweiler:
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A consolidation loan may seem like the perfect solution to your financial challenges, but the problem is these loans are very difficult to get today - especially at an affordable rate. You don't indicate how much you owe, but you can certainly try talking with your credit union or a local bank to find out if they offer these loans. (Avoid online loan companies that promise you a loan regardless of your credit, but charge an upfront fee for "insurance," a "down payment," etc. These are often scams.)

I would suggest your next step be a consultation with a reputable credit counseling agency to get objective feedback on your situation with them. I would also recommend you get and review copies of your credit reports at Any lenders you deal with will review your credit, so you should make sure the information reported is accurate and complete.

Good luck as you work through this difficult time.
Virginia Clay CFA:
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Get an appointment with a non-profit credit counseling service. You may be able to find this through an affordable housing organization in or near your community. Make sure you determine the reputation of the organization. Find a service that is free. You may have to wait. Have this service help you evaluate the terms of the loan and your credit before signing any documents. Be sure you understand all the terms if you enter a loan agreement.

[You may] also, go to your local library, check out and read a book on credit and a book on financial planning, now. It is easy to get taken advantage of in the financial services world. If you are not experienced in this area you must educate yourself. It does require time and reading.