Many people think that debt consolidation saves a lot of interest since you only have to make one small payment. However, the reality is that debt consolidation is very dangerous. This is because it only allows you to treat the symptom of debt but not to solve the problem.
There are those that consider debt consolidation to be just another way to make money of individuals who are deep in debt. You may think that you are making progress in eliminating your debt by consolidating. This is not necessarily so since the debt is not paid off in its entirety and you are still indebted. Sometimes reducing your interest rate with a 0 balance transfer credit card may be all you need.
Debt consolidation is the solution for people who are trying to overcome a debt situation that is spiraling out of control. You borrow money to repay the many loans that you had previously taken. You may think that this will relieve you of the headache of haggling with your many creditors. However, the fact is that even with debt consolidation, you are a debtor-albeit with a single creditor.
Debt consolidation often makes it look like your lot with regards to indebtedness has improved. However, the debt and the bad spending habits that caused it are still existent. All you have done is changed creditors. Getting yourself out of help is never easy in spite of debt consolidation and all the good things it may seem to offer.
If you study the statistics, most people who attempt to consolidate their credit card debts often find out that their debts have resurfaced, sometimes worse then ever. Usually, they hardly ever pay cash for their purchases and transactions. They also do not limit their expenditures since they are disillusioned into thinking that the debt consolidation will sort out their troubles. Increased expenditure buries them further into debt. This is compounded when they fail to save for emergencies and unexpected events, which eventually become part of their debt when they die. In this way their debt becomes the problem of their heirs and their heir end of inheriting much less then they would have otherwise and sometimes nothing at all.
Debt consolidation usually appeals to people since the case is often that the interest rate is lower on the debt with lower payments. However, if you look carefully, you will notice that the interest rate and the payments are lowered because the debt-repayment period has been increased. This simply means that you will be indebted for a longer period. Hence you end up paying your creditor more money. This is the main reason why many lenders get into the business of debt consolidation.
In conclusion, the best way to get yourself out of debt does not lie in the interest rate or in debt consolidation. Once you realize that the root of your problem is that you are spending beyond your means, it becomes obvious what needs to be done to solve the problem. Write down a plan on how you will go about eliminating your debt and stick to it. Look for other ways of making money such as getting extra jobs. Spend less money than you make and be very frugal. You will discover that this is more useful than debt consolidation.