Disadvantages of Debt Consolidation

When we’re staggering around knee deep in debt, we will often see debt consolidation as a way to move up to higher ground and get out of debt. With so many Americans being in debt, these debt consolidation programs are becoming more and more popular. However, they have some really significant disadvantages that one should consider before proceeding with this type of thing.

When going through a debt consolidation company, it will take you longer to pay off your debts. You may find that you are in for 20 or 30 years with one of these places depending upon how much debt you have accrued. That’s a huge commitment and a long time to be paying on debt.

Another disadvantage is that if you’re on with one of these companies for say, 20 years, that company could very well go out of business. A lot can happen in 20 years. If they do go out of business, and it’s handed over to some other owner or company, you might find yourself in a situation that can be messy and quite expensive. They may have new ‘terms’ or payments that you will have to make. This can be a bad situation for you.

When you are paying these smaller payments through debt consolidation companies, it can give you a false sense of security. You think that you’ve got everything under control, when in fact, you may not. If you still have those bad spending habits that caused you to rack up so much debt in the first place, you may just max your cards right back out again.

One great alternative to debt consolidation is to transfer all of your debt to your lowest interest credit card (if possible.) This will give you a bit more freedom as you won’t be paying huge interest rates while you’re trying to get your finances back on track.

Another great way is to pay off your highest interest rate card as fast as you can while you pay your other cards with the minimum amount. Once you get the highest interest rate card paid off, move the next highest one up and pay it off as quickly as you can and so on. A really great idea would be to cut those cards up after they have been paid off!

You can get back on track with your finances, and you can get out of the bog of debt. Think your choices through thoroughly and reconsider debt consolidation offers that you may have been thinking of going through with. Good luck.