It only takes a couple of loans, and few, non- expensive purchases to accumulate a pile of debt. Although there are some people who make unnecessary purchases to no end, some bad debt actually started with a few neglected bills that rolled into a huge ball of debt. Regardless of the cause, bad debt should be removed from your financial life entirely, if you want to be financially free.

However, as easy as it is to earn debt, it is 10 times harder to pay it off. With you having to eat, live, work, and pay for your other needs such as shelter and transportation, paying off debt would be really challenging. Some people may feel overwhelmed doing it alone, so they seek financial consultation. One expert service commonly employed by people who can’t handle debt is debt consolidation.

Debt consolidation is a debt reduction strategy that aims to handle all debts using one account. Basically, the debt consolidating company will contact all of the borrower’s creditors and negotiate to have all of the debts consolidated into one loan, with a lower interest rate that the payer can afford.

So maybe now you’re asking how is this possible. Why would the creditors agree to this scheme? It’s very simple. The length of the loan is extended. For example, if it would take you a year to pay off all those debts in your own way, you will be given 3 years or more to pay for the consolidated debts. So although you will be paying lower interest, you will also be paying higher that what you should have. And take into account that you also have to pay fees to the consolidator, which is typically included in your installments.

What makes it a viable option for borrowers is because it would be more convenient to pay all of their obligations at the same time, at a price they could afford. The payer will give the agreed amount to the consolidator, who in turn distributes the money to all of the creditors. It may look like a win- win situation for everyone, but in reality, it’s not for the payer.

This is because the payer carries all of the suffering. The payer prolongs his agony in extending the payment period, and he also loses much cash in doing so. There’s nothing for the payer to gain except temporary relief, while the creditors and the consolidator earn money from his misery.

If you are in danger of bankruptcy, debt consolidation may be a reasonable option, if only to prevent the dirty “B” word from happening. However, as long as there are other choices, debt consolidation should only be a last resort.

While debt consolidation may actually be helpful is you are having trouble with your debts, it doesn’t really address the root cause of the debt, such as faulty decisions and attitudes towards money. Even if you opt for consolidation, if you don’t start changing your behavior, you will just end up repeating the same mistake.