It is better to think that debt is a habit that needs to be corrected not a problem that needs solved. Save more and spend less is a much easier way to get out of your debt, certainly much better than debt consolidation. Simply because debt consolidation doesn’t work.
Facts About Debt Consolidation
Turns out just about every debt consolidation firm is out there in order to make money off of your debt. 8 times out of 10 after someone consolidates a debt, it comes back. To be fair it isn’t a company preying on you, it is most likely your poor habits that are preventing you from escaping this pit of debt. If you don’t have an emergency fund to pay for those unexpected things you will most likely end up in a deeper hole.
The ideas of low interest rates and smaller payments leads one to think that debt consolidation might be a good option.  This is usually due to the fact not that you are saving money but that the amount of time that you have to pay it has been extended. This is how those debt consolidation companies make their money, the longer you are in debt the more you are paying the guy who loaned you that money.
Let’s say you have $30,000 in unsecured debt with multiple loans one of which is a 2 year loan that is $10,000 at a twelve percent interest rate and a 4 year loan that is $20,000 at ten percent interest. Monthly payments for each one are $517 and $583 for each of the loans coming out to a total of $1,100 that you are paying each month. This is where a debt consolidation company likes to shine a false hope on to your situation. They might tell you that they will lower your payments down to $640 a month with an interest rate of nine percent by combining both of these loans into one larger loan. What an amazing deal this may seem to be?
Except this is over a term of 6 years in order to pay off the total sum of your debt. The only problem with this is that you end up spending nearly $6,000 more than your original loan. They are not there to make things perfect for you, they are there in order to make dollars and cents off of you.
What you really need to be paying attention to here is the way you handle your money. Sitting down and creating a budget for yourself will get you a whole lot further than getting a lower interest rate. Stay with what you commit to and do the little things in order to save your money. If you make $1,000 a week do not spend more than $1,000 a week, otherwise you don’t make any money. It is pretty simple. Stay away from debt consolidation!