Debt Delusion: Consolidation Isn’t Always The Best Solution To Debt

If you asked ten people to give you the best way to fix their debt issues, what do you think the overwhelming response would be?

The truth is most of them would think about ways to consolidate the debt, make it into one lower payment and simply borrow money of that same amount but have a lower interest rate.

And while that makes sense, in theory, you’re forgetting about one primary element that you’re missing from this plan: fixing the reason why it arrived and arose in the first place.

Debt consolidation is a band-aid on a bullet wound, not nearly what type of treatment you’d actually need for something as serious as thousands and thousands of dollars in debt. While consolidation of debt through a third party will most likely lower your interest rate, you’ll still be on the hook for more money than the original debt (which would be the same case if you didn’t go through a debt consolidation agency) plus you’d simply extend out the payoff period. So adding a few years on to your debt might sound perfectly fine, but debt consolidation on the surface is a lateral move at best.

The real key to debt and how to remove it is to budget accordingly and start eliminating expenses and stop using your credit cards or borrowing money. To fix the problem of amassing debt, you have to look in the mirror first and foremost. Before you reach out for a life preserver, why not try swimming back to shore on your own first.

Here’s the thing: debt consolidation is fine if you’re in that bad of shape and you believe that it might take you 20 years to pay off all your debt. So, in that respect, the understanding of wanting to gravitate toward consolidation is acceptable.

But the fact remains is that about 70 percent of individuals who consolidate debt end up back in the same position, meaning debt consolidation in the equivalent of yo-yo dieting. You don’t make a lifestyle change, but rather the change is simply adhering to a payment structure (no different than dieting) and then as soon as the payment structure goes away, no lesson is learned, and you go right back to the way it was.

To solve the debt, you must fix inherently the bad habits that go along with spending improperly or using credit cards haphazardly, just to name a few. Once those traits take a permanent nap, you’ll be more likely to eliminate and most important sustain your financial stability.