Debt is like quicksand, once you fall in things start sinking pretty quick. The more you struggle, the more you thrash around, the quicker you fall. People start grasping for anything they can to pull themselves out, sometimes even bringing family members down with them. Inevitably they hear about the solution that will “clear up all their problems” – A debt consolidation loan.
Here’s the deal guys, it’s just like your mom used to tell you: If it sounds too good to be true, it is. There are a few problems with the typical debt consolidation loan and one MAJOR problem with all of these types of loans.
1. The “Debt Consolidation” companies that typically offer these types of loan programs as their only source of business are usually scum bags. These type of companies prey on desperate people, they hide hidden fees in their loan program and do next to nothing to help solve the problem. I new a guy who owned a local debt consolidation firm, let me put it to you this way, he owned more sports cars and mansions than some celebrities. Do you think he was making a few bucks off of people who were turning to him for help? Absolutely!
2. When you are in debt you are often making decisions under extreme pressure. Many of the sales people at these debt consolidation firms are so pushy that they put additional pressure on you to make a hasty decision. More often than not these decisions produce outcomes that are detrimental to your future as a savings pilgrim.
3. Debt does a funny thing to logic. All you can seem to understand when you are in debt is that the noose is slowly tightening and you are just trying to survive. Add in a few debt collectors calling your house at all hours and normal logic goes out the door. Many times people have options out side of a debt consolidation loan that they can’t seem to see clearly. Selling some assets, picking up more hours at work, a second job or looking for help from family are all options that often people don’t see.
The major problem with a debt consolidation loan:
The major problem here is not the debt, it is the psychology of spending that pushed the consumer into this problem in the first place. By moving the debt to a consolidation loan all you have done is freed up the credit cards to potentially re-spend on! Many, many times people will double up their debt load in a matter of months by moving their old debt to a consolidation loan and then they go rack up new debt again on the available credit card. Talk about Quicksand!
If you want to get out of debt, there is only really one solution - a lifestyle change.
It is not the easy answer that most people are looking for. There is nothing easy about it, in fact it is down right hard. There are steps you can take to tackle credit card debt and be successful, that’s another post.