Challenges

• Debt and credit management is important to teachers because they often receive pay only during the school year. Teachers may not receive paychecks during summer months, which can cause problems if they're living paycheck to paycheck — and create a need for debt consolidation to lower overall monthly debt obligations. Debt consolidation also is helpful for teachers who are unable to quickly increase their salary. Teacher salaries are usually controlled by school boards or collective bargaining by unions. Unlike employees in other professions, a teacher can't make a request for a raise.
  
  

Loans

• The California Teachers Association recommends that teachers with their own homes consider home equity loans for debt consolidation. The agency notes that credit unions often offer competitive rates for home equity loans and may even offer special programs for teachers. For example, a credit union may structure a home equity loan or other debt consolidation loan so that payments aren't due during summer months when the teacher isn't working.
  
  

Credit Cards

• The California Teachers Association also recommends transferring balances on credit cards. A teacher could consolidate a number of smaller credit-card balances onto a single card with a large credit limit. People using that strategy usually apply for a credit card that has no finance charges over a certain period of time, such as a year. After receiving the card, they transfer balances from high-interest cards and attempt to pay off the new credit-card balance before the promotional period ends.
  
  

Precautions

• Teachers consolidating debts should review warnings from the Federal Trade Commission before taking out a loan. The FTC warns against taking out home equity loans because failing to make payments on the loans could lead to foreclosure of the property. The FTC also notes that people consolidating loans sometimes eventually fall deeper into debt by starting to use the credit cards they paid off with the consolidation.
  
  

Choices

• Home equity loans usually offer interest rates that are lower than other loans suitable for debt consolidation. Banks and credit unions offer low interest rates on these loans because the debtor's house serves as collateral for the loan. Unsecured signature loans are an alternative to home equity loans. Interest rates are higher than on a home equity loan, but the loans don't require collateral.