Loan Consolidation: A Smart Choice?

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Loan consolidation, a service offered by may loan and credit-card companies, generally combines the balance of several debts into one new, larger loan with a lower monthly payment thank the individual debts combined.  Paying just one bill each month may sound tempting, but this option has a major drawback:  It can be more expensive, says Janet Bechman, a financial specialist at Purdue University, in West Lafayette, Indiana, because often a consolidated loan takes substantially longer to pay off and therefore costs more in interest.

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  A better bet:  Try to work on a budget so that you can pay off the individual loans without it seeming so overwhelming.  If you simply can’t afford that option, shop around and compare interest rates, provisions and penalties on at least three consolidated loans.  Know what you’re getting into, so you don’t compound the problem you had to begin with.