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Don't Fall Into The Trap Of Debt Consolidation

Jan 15, 2008
There are two sides to the story when it comes to debt consolidation. You only want to be on one side of it though as this is where you will benefit from the process. You will be able to pay off your debt and save money at the same time. On the other side of the issue is a term that draws out for a very long time and you end up paying way too much in interest.

With a debt consolidation loan you will be rolling everything into one payment which is very convenient. You can write one check or you can have it taken directly out of your checking account. However, you need to figure out what the overall cost of that process is going to be.

You definitely have to be careful when it comes to how much you will end up paying with a debt consolidation. You don't want to have a higher interest rate than you already did. You also don't want to be paying ridiculous amounts of money for interest due to extending the length of the payoffs. Make sure you read all the fine print too as you don't want additional fees for early payoff or your interest to increase if you are late making a payment.

The best way to really compare everything is to know the current balances and rates of interest on your debts. Compare what it will cost you to pay them off at their current terms versus what it will be if you consolidate them. You may find that debt consolidation loan doesn't look nearly as appealing once you have crunched the numbers.

In order for debt consolidation to really be helpful it needs to save you money. This is very possible but just take the time to make sure. It is very possible that you will need to change your spending habits too. Enrolling in a budgeting class can really help you see where you are getting yourself into trouble.

What happens too often is that debt consolidation is processed so that a person can have more spendable income. Yet they continue to spend in ways they shouldn't and as a result they incur more debt. They end up right back in the same situation or worse in no time at all.

There are definitely some wonderful benefits to debt consolidation. It may be a way for you to pay off your debts and save money. There are also some serious issues that can result from this process and you don't want that backfire to get you into a corner. Find out the details of the scenario before you commit to it.

While getting out of debt is a dream many people have, there are some things you can do that will create more issues. Debt consolidation sits on the fence as it can be a benefit for a weight around your neck. Only you will be able to do the research to discover if this really is something that will be good for you in the long run.
About the Author
Robert Bain is fascinated by the secret credit industry. He follows personal credit related issues such as credit cards, debt relief, bad credit card repair , prepaid credit cards, travel rewards, cashback offers, business credit and personal finance.
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