Contact: Paul Golden 303-224-3514, pdg@nefe.org
DENVER—Seventy-five percent of Americans have debt, and
51 percent are worried about the balance they owe, finds a new poll from the
National Endowment for Financial Education (NEFE). The online poll,
commissioned by NEFE and conducted by Harris Interactive in December 2011 among
2,525 adults ages 18 and older, demonstrates the overall debt burden people
across the country are carrying(1). And although some debt-laden Americans
might continue with their current strategies to pay down debt in 2012, others
may be feeling the crush of holiday credit card statements and multiple debts
or struggling to keep up with their current monthly loan payments.
For cash-strapped consumers, debt consolidation loans might seem like a quick fix to solve their money woes. But they will want to tread carefully, as new NEFE-supported research reveals ads for these loans do not give consumers a full picture of the total costs, and furthermore, these loans may cause consumers to make their financial situations even worse.
“The advertising for debt consolidation loans often fails to mention the downsides of these types of loans,” says Ted Beck, president and CEO of NEFE. “In presenting debt consolidation as an option, much of the focus is placed on the ‘lower’ amount of monthly payments, without regard to impacts like total interest paid. We encourage consumers to enter any financial decision with their eyes wide open.” Read the full report here
About the National Endowment for Financial Education (NEFE) NEFE is a nonprofit foundation that inspires empowered financial decision making for individuals and families through every stage of life. For more information, visit www.nefe.org
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4 Tips for Understanding Debt Consolidation Loans
2. Know
the seller. Lenders are not obligated to give you the best rate for which you
qualify, so shop around and look carefully at the terms. Also, just because he
or she is willing to sell you a loan doesn’t mean you can afford it.
3. Avoid
the slippery slope. Don’t fall into the trap of increasing the amount of a debt
consolidation loan to finance additional purchases. You will unnecessarily
increase your monthly payment and boost your overall debt.
4. Establish
a plan. The best way to get out of debt is to create a financial plan and stick
with it and to live within your means.
5 Questions to Ask a Debt Consolidation Loan
Lender
2. What
are the interest rate, term, monthly payments and total amount of interest
paid?
3. What
collateral is required for this loan? What fees or paperwork is required for
the collateral?
4. Is
there a pre-payment penalty?
5. How
does your firm make money on this loan?
Courtesy of National Endowment for Financial Education (NEFE)
