One of the most important things that you can come to understand regarding your debt and the concept of debt consolidation is this: You absolutely cannot borrow your way out of debt, in order to solve all of your problems. More than 80 percent of all individuals that managed to bring their current accounts down to a 0 balance did so using a debt consolidation loan, however these individuals ended up owing even more money to the second lender because interest rates ended up hurting them worse than they imagined.
Most consumers are so excited about the prospect of paring down or completely paying off their debts that they gave very little consideration if any to what consequences would exist for the new loan, the debt consolidation loan. Many times these individuals end up owing as much as 50% more to the new lender than they owed for their original debt, which means that this really is not helping the problem in any way.
Unfortunately, this really is not even the worst of it. Countless people are taking debt consolidation loans out as a means of paying off their credit cards. They make the mistake of keeping these credit cards open without doing anything to change their spending habits. Because they do not do anything to fix their spending habits, they end up re-maxing these credit cards out so that they are now tackling credit card debt that is mounting quickly, and the high interest debt consolidation loan that they used to initially pay off the credit cards in the first place.
By the time something like this happens, the consumer has simply come full circle because they are now paying the debt consolidation loan payments and their credit card payments. It really cannot get worse than this, right? You have effectively doubled or tripled your debt in the process of trying to get out of debt, which is completely worthless.
The individuals who do find success with debt consolidation loans are those who have a stable plan in place before they ever actually take the loan out. Not only this, but they are also the individuals capable of following the plan to the letter, never straying no matter what it costs. If you want to succeed with debt consolidation, then you need to understand what it means to take out and pay off a debt consolidation loan. If you do not think that you have what it takes to pay off a loan designated for paying off your other debts, because most of these loans have higher fees and higher interest rates, then by all means find another method of paring down your debt.
Paying off debt is not easy, no matter which way you do it. Debt consolidation loans may be a solution for some, but they are not the answer for everyone because they create more debt rather than getting you out of debt completely. If you have the will power and the income to trade old debt for new debt, and can pay the new debt off before the interest rates get you, then debt consolidation may be the answer. Otherwise, choose a different solution to get you out of debt.
Photo Credit: 1
Related Posts- RCDL Roundup - On the First Day of Xmas My True Love Gave to Me... lots of link love. Banking, Credit, and Debt Credit Karma asks Is a Credit Union Right For You? NCN posts Up, Up, And Away - Check Your Credit Card Statement! Cash Money Life blogs Two Financial Goals - Less Debt, More Income. Guest Post:......
- 3 Reasons Why Paying With Cash Hurts You in the Long Term Many of us have been conditioned to think that living debt free is the only way to be. While there is some truth in this statement, if you’re completely debt free and using only cash, you’re hurting your chances of getting a new home, and you may end up in......
- The Truth About Dividends When most of us hear the word dividends, we think about the easy life, of lying around on the beach while earning an insane amount of money. The cold hard truth is a lot less pretty. Dividends can pay, but unless you've got a lot of money invested, your returns......
- How to Find Financial Stability in Unstable Markets Right now, the only news about the economy seems to be bad news, and it may take a few months if not years to improve. The dollar is weak, oil prices are still up and the cost of living has skyrocketed this year. These are unstable times, but that doesn’t......
- 4 Tips to Getting Bad Debt Under Control If you are swimming in a sea of bad debt, keeping your head above water can be incredibly difficult. Thanks to our consumer culture, the availability of credit cards and a general lack of concern for what debt means, many people find that their bad debt is out of control.......
- New Loan Funded — Debt Consolidation and New Inventory — $5,000 at 22.5% — C Credit — DTI 175% A new loan funded (Debt Consolidation and New Inventory — $5,000 at 22.5%). I participated via a standing order Low Amt (......
- Top Prosper Listing Titles Of All Time Here are all Prosper listing titles with at least 100 occurrences. Once again, the credit for the initial idea goes to leporello. # Title 4744 Debt consolidation 681 BILL CONSOLIDATION 664 consolidation 604 Consolidating Debt 518 Paying off debt 516 paying off bills 501 Starting Over 467 pay off bills 466 Pay off credit cards 442 Credit Card Consolidation 439 Paying......
- Programmer and Blogger Seeks Debt Consolidation Loan My Prosper Group is proud to present our first listing... This listing is attempting to put the social in social capital. Deep Market also posted the following Social Lending is not Socialism. He has been a member of my group, following the p2p lending market and commenting on RateLadder for......
- Borrow Money with Unsecured Personal Loan With Prosper you can borrow money via unsecured personal loans, up to $25,000 and depending on you credit at rates as low as 8% (lower in some cases). Yesterday I made the case to borrow money on Prosper with unsecured debt. I talked about the 2 most important things to getting......
- Lender Due Diligence I liked the previous rgf post so much I went and looked up another of his posts... This one is on Prosper Lender Due Diligence. The forum thread is here. Enjoy: Those that have followed my posts know that I lend money for a bank for a living (an underwriter).......
- Credit, Charge Cards Trading Cards Collectibles
- Card Shuffler Casino Collectibles
- Card Dealer Shoe Casino Collectibles
- Card Guards Casino Collectibles
Categories:
Debt, Goal, Money, Personal Finance, bad debt, credit cards, good debt
Tags:
1 comment so far ↓
I believe that if someone actually collected the data, it would show that the vast majority of borrowers end up with a lower net worth as a result of a consolidation loan, because it frees up cash to take on more debt.
Leave a Comment