Contact: Paul Golden 303-224-3514, pdg@nefe.org
DENVER—Seventy-five percent of Americans have debt, and51 percent are worried about the balance they owe, finds a new poll from theNational Endowment for Financial Education (NEFE). The online poll,commissioned by NEFE and conducted by Harris Interactive in December 2011 among2,525 adults ages 18 and older, demonstrates the overall debt burden peopleacross the country are carrying(1). And although some debt-laden Americansmight continue with their current strategies to pay down debt in 2012, othersmay be feeling the crush of holiday credit card statements and multiple debtsor struggling to keep up with their current monthly loan payments.
For cash-strapped consumers, debt consolidation loansmight seem like a quick fix to solve their money woes. But they will want totread carefully, as new NEFE-supported research reveals ads for these loans donot give consumers a full picture of the total costs, and furthermore, theseloans may cause consumers to make their financial situations even worse.
“The advertising for debt consolidation loans often failsto mention the downsides of these types of loans,” says Ted Beck, president andCEO of NEFE. “In presenting debt consolidation as an option, much of the focusis placed on the ‘lower’ amount of monthly payments, without regard to impactslike total interest paid. We encourage consumers to enter any financialdecision 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 financialdecision making for individuals and families through every stage of life. Formore information, visit www.nefe.org
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4 Tips for Understanding Debt ConsolidationLoans1. Weighthe downsides. Longer loan terms may decrease your monthly payments, but theyincrease the total amount of interest you will pay over the life of the loan.In addition, you might incur hidden fees and penalties.
2. Knowthe seller. Lenders are not obligated to give you the best rate for which youqualify, so shop around and look carefully at the terms. Also, just because heor she is willing to sell you a loan doesn’t mean you can afford it.3. Avoidthe slippery slope. Don’t fall into the trap of increasing the amount of a debtconsolidation loan to finance additional purchases. You will unnecessarilyincrease your monthly payment and boost your overall debt.4. Establisha plan. The best way to get out of debt is to create a financial plan and stickwith it and to live within your means.
5 Questions to Ask a Debt Consolidation LoanLender1. Isthere a fee to apply for this loan?
2. Whatare the interest rate, term, monthly payments and total amount of interestpaid?3. Whatcollateral is required for this loan? What fees or paperwork is required forthe collateral?4. Isthere a pre-payment penalty?5. Howdoes your firm make money on this loan?
Courtesy of National Endowment for Financial Education (NEFE)
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