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Are there any downsides to consolidating my debt?

On Behalf of | Aug 3, 2017 | Credit Card Debt

If you live in Goodlettsville and have a lot of credit card debt, it may seem like paying off your accounts is a hopeless situation. While there are a number of solutions available, a popular one that many people turn to is debt consolidation. While this option can be beneficial and save you money over time, there is one huge downside. Consolidating your existing debt does not fix your financial situation, nor does it stop you from incurring more debt on top of the new loan.

As USA Today points out, a debt consolidation loan can help you save money over the long run by giving you a fixed monthly payment that never changes so you know what to anticipate and by providing you with a much lower interest rate than you would receive from your credit card issuers. However, if you are not able to pay the loan off within the given timeframe, usually three to five years, you may not be that much better off down the road.

In addition, a debt consolidation loan pays off your existing credit card balances. If you are able to stop using your credit cards and curb your spending, you will be debt free in just a few years. But if your income is low and your expenses are high, it can be extremely easy to reach for that plastic and run your balances right up to where they were. Plus, many people use credit cards for things that seem like necessities but in truth, are probably not.

If you are in the situation where, even with a debt consolidation loan, your expenses are unmanageable or adhering to a strict budget is untenable, you may be better off pursuing a different type of debt solution, such as bankruptcy. This is not intended to be legal advice and is provided only as general information on this topic.


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