It’s tempting to pay off all those credit card debts with a new loan, then make just one monthly payment. Most consumers who use bill consolidation or take out debt consolidation loans end up throwing good money after bad.They usually build an even more towering mountain of debt in just a few years because they didn’t change their spending habits.
Ideally, this new account or loan will have a lower interest rate than the accounts had previously.
The main advantages of this are: There are many types of bill consolidation, from student loan consolidation, to credit balance transfers, to home equity loans and other forms of secured debt consolidation.
In all cases, the consolidation just covers up a problem.
It doesn’t give consumers the resources they need so that they don’t have to rely on credit and can begin to build a healthy financial future. For example, when consumers get on a longer repayment schedule, they end up paying more over time, even if the interest is lowered some too.
And, some forms of consolidation are extremely risky.