Did you know that 88% of those who do debt consolidation actually end up racking up more debt or do not change their spending behaviors?
If you really let that statistic sink in, that means that nearly 9 out of 10 people who consolidate their debt, whether balance transfer or loan, end up failing. If that is not eye opening to those who read this, then I don’t know what is! I can think about how many balance transfer offers I have received over the past 2-3 months and how tempting it may be for those who are presented those “lovely” offers (sarcasm!). Can you imagine consolidating your debt and then going right back into debt again?
If it sounds unrealistic, let me break it down a bit further. When someone uses a debt consolidation loan or balance transfer, the balances on the other debt (credit cards, loans, etc.) get paid off. By those balances getting paid off, it frees up the available balance on any revolving account you may have, such as a credit card or line of credit. With your balances then being transferred to a loan, you essentially become victim to the “out of sight, out of mind” concept and almost instantaneously feel relieved that you now have available credit on your cards.
But is it really something to be relieved about? Some people get debt consolidation confused with debt settlement. The difference can actually mean an entire shift in your finances if a choice is made while not being sure what the difference is. Debt consolidation is essentially combining all of your debts into one loan. With one loan, banks try to persuade customers that it is an “easy and manageable” way to pay down your debt with less stress. Debt settlement is when a creditor lessens the amount you have to pay and is then contractually agreed upon with the customer.
Let me ask you this, would you want to leave yourself vulnerable by consolidating your debt and opening up your available credit, knowing you are sincerely looking to become debt free? Would you expect your spending habits to change just because your five balances are now one big balance? What about this- would you truly believe a higher interest loan would help you get out of debt faster? Don’t let the financial institutions fool you! Debt consolidation does not change our spending behaviors and it DEFINITELY does not save us money. Debt consolidation loans are personal loans- and personal loans tend to have significantly higher interest than most other loans.
If you truly are looking to pay down your debt and move towards becoming debt free, I promise you it is POSSIBLE! I have helped many of my clients become debt free and I am telling you- it is the BEST feeling ever! I personally am debt free and I can only speak from experience when I say this: Being debt free is the most relieving feeling that I cannot even begin to describe. It is within reach, whether you have six figures of debt or four. YOU GOT THIS!
Schedule your FREE consultation with me for more information: https://calendly.com/twosensemoney/30min
7 thoughts on “Debt Consolidation- Is it worth it?”
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Thanks for these pointers. One thing I additionally believe is that often credit cards featuring a 0 monthly interest often lure consumers in zero rate of interest, instant acceptance and easy on the web balance transfers, however beware of the main factor that will certainly void the 0 easy road annual percentage rate and as well as throw anybody out into the terrible house quick.
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