Consolidation service should be last resort

Dear Dave, We have about $20,000 in debt, and my husband and I have made a resolution this year to pay it off. I think we should live on a really tight budget and save like crazy, but my husband is really fired up about using a debt consolidation service. What can I say to make him change his mind about this? - Brandy Dear Brandy, Debt consolidation services aren't evil, but there are huge problems involved in using them. For one thing, it will trash your credit for the purposes of buying a house. According to the underwriting guidelines of both Fannie Mae and FHA, you will be treated as if you'd filed Chapter 13 bankruptcy if you use one of these debt CON-solidation outfits. You think you're doing something about your debt problem, but the debt is still there, and in the end, so are the debt-causing habits. The consolidation idea seems appealing because usually there's a lower interest rate or lower monthly payment involved. In most cases, however, the lower interest rate or payment only exists because the term is extended. You might pay less each month, but you end up staying in debt longer. There's another problem. Your husband wants to wiggle out of the mess instead of owning up to it and fixing it. Sometimes you've got to face the music. Making sacrifices and living on a tight budget is the best way to fix this mess and learn a lesson in the process. There's no magic pill, and no consolidation company is going to get you out of debt and help you stay out of debt. You're never going to learn how to control your finances if you turn it over to someone else. - Dave Buying early Dear Dave, I'm a sophomore in college, and I earn about $1,500 a month at my job. My rent is $500 a month. I don't really have a credit history, but I've saved $20,000, and I'm thinking about using it as a down payment on a $140,000 home. Would this be a good idea? - Gil Dear Gil, I wouldn't do it. I love the fact that you're working while you're in school. Saving that much money is fabulous, especially for someone who's not even 20 years old. I almost did the same kind of thing when I was in college. I was into real estate, and I really wanted to test my wings and buy something. Looking back though, I'm glad I didn't. It would have been a huge mistake. College can be a bumpy ride, even for the most responsible student. If you lost your job, you'd be in a real mess. Plus, the 2 years following graduation have the potential to be the most permanently life-changing period you'll ever experience. You could move across the country for a new job, get married, or decide to attend graduate school. In any of these situations, a house would turn into an anchor around your neck. Being a renter is a great thing while in school. In the meantime, pile up cash until you're ready to settle down. - Dave