Do Not Get Into A Debt Dilemma!

Posted on March 21, 2008
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by Zulika van Heerden
Debt consolidation can seem like a breath of fresh air, especially if you have been dogged by your debt and credit problems for a long time. Your creditors are suddenly off your tail, you have a credit rating to speak of again and you can breathe a sigh of relief.

But this sense of security may very well be false, particularly if you commit three common mistakes made by many who choose to consolidate their debts. You better avoid those same mistakes or else you are likely to find yourself running through the whole cycle of indebtedness all over again.

Mistake 1: No Plan at All

It might sound ridiculous but many have participated into a debt consolidation scheme without any sort of idea for getting rid of that debt eventually. It is very foolish to enter a debt consolidation scheme without a concrete action plan for reducing and gradually eliminating your debts.

Remember, debt consolidation schemes merely give you some leeway when it comes to deadlines for paying off your debts, but they do not hold off debts indefinitely.

Consolidation schemes still have deadlines for paying your bills that you must eventually meet. To make matters worse, your consolidated debts accrue interest and other fees the longer they are left stagnant, so you better not forget about them.

Mistake 2: Consolidate then Splurge

Mistake #2 is considerably worse than the one prior because you actively contribute (to the detriment) of your debts. Again, this stems from the idea that debt consolidation schemes magically hold off your debts for indeterminate amounts of time, or even eliminate them completely.

The leeway afforded to you by a debt consolidation plan should be used for working towards cutting down the debts, not adding to them. You can hardly call a spending spree cutting down, especially when you are in so much debt already.

This pattern of getting yourself into more debt right after promising to pay off your previous ones will, in the long and short run, work to the detriment of your budget, your finances and your credit rating.

Mistake 3: Consolidating Everything

Many decide to consolidate every single one of their debts into just one debt consolidation plan. Some even do this despite the fact that some of their debts are already on one consolidation plan or another, simply because the new scheme offers a longer term.

Consolidating everything rarely works especially if you have a very large amount to deal with or if you have already got some debts under another scheme. Other shorter-term schemes often offer lower interest rates in lieu of the longer time to pay.

It is recommended that you take the offer with the lower interest because you have to pay less in the long
run and end up paying debts for less time, even if you have to pay more in the short term.

Debt consolidation is not just about lifting the pressure of your debt deadlines from your shoulders, though that is an obvious aspect of it. Debt consolidation does not keep your debts at bay forever and it does not pay off your debts either.

All a debt consolidation scheme gives you is time, which would just be wasted if you did not have a predefined plan on how to use it.

Zulika van Heerden provides valuable information on her site on how to live a debt free life.To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za