Asked & Answered

Consolidation Loans

Q - I have an adjustable rate mortgage and some other debts. Is it a good idea to consolidate my debts and get a fixed rate mortgage?

A - What caused the debt in the first place? Do you have a habit of charging and borrowing? If so, all you will do is end up with a larger mortgage and the same amount of debt within three years. Trust me.

First, you need to make sure you have a plan in place and the self-discipline to avoid borrowing money going forward. Then go ahead and consolidate as long as the numbers make sense. You don’t want to refinance into a 30-year mortgage if you only have 10 years left on your current one, and you don’t want your overall monthly payments to increase.

Also, don’t consolidate your car payment. You won’t have that car for 30 years, and I don’t want your next question to be about foreclosures.

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Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and a contributor to YoungMoney.com. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them.You can learn more about money at www.ExtraCreditBook.com