Is Debt Consolidation Any Good?

May 4, 2012 by  Filed under: Debt 

Quite a number of people tend to overspend because they are lured by marketing hype. They are attracted by the marketing hype and shell out money that they do not have, and soon realize that they are deep in debt. Spending money that is easily lent to you is easy, but when it comes to paying it back – well that is quite another matter.

However, there is actually a good way of getting out of this debt.

One of the main causes of debt is that piece of plastic called a credit card. Those devilish pieces of plastic make you feel as if you can buy what you want. You hand over that card at the checkout completely oblivious to the fact that you may be approaching your credit limit.

Not wanting to be maxed-out, you pull out another plastic card and use that instead. You will do anything to get the thing you want to buy, and that second card will do, thank you very much. So you think that the easiest way to get around paying for it all at once is to pay the minimum monthly rate due, not realizing that all you are doing is paying interest.

Before long you can see that you are in a web of debt. So why on Earth did you not use cash? Perhaps you should have used your debit card instead?

You used those credit cards because you knew quite well that you did not have the necessary funds in your bank account. You just found the cards too easy to use to get what you wanted there and then. If you did not have those cards you could not have spent what you did not have, could you?

If you only had cash on you, or just your debit card, you would only have spent what you could afford. That way you would have had control over your spending. But you did not have enough money in your bank account, so why on Earth did you spend money that you did not have?

Now you have to do something about your debt, right? Luckily, you are not in a debt crisis, yet, and can actually afford the minimum repayments. But you realize quite well that you are wasting your hard-earned cash by paying only interest every month. To get around this you realize that you would be better off with just one monthly payment, not two.

If you consolidate the debt on both credit cards then you will be better off. Consolidation of debts means merging them into one, with a lower monthly repayment compared with that of the two separate cards. You decide over how long and how much you can afford to pay every month until your debts have been cleared.

For this to work, you just add the two credit card debts together and take out a loan equivalent to that sum. Make sure that the new loan has a much lower interest rate than the two cards combined.

By consolidating, you will be paying much less every month. You will be saving a lot of money because you will be paying off the combined debt of two credit cards as a much smaller amount.

Make sure you do not use your cards whilst paying off your consolidation loan. Burn those evil things. Tear them up. Incinerate them. Tell the credit card company to cancel the cards. Tell them where to put their pieces of plastic.

Be rid of the evil plastic for all time – credit cards are not needed by those who can not afford them.

Chris Smith now writes about debt management and other topics on finance. More can be found about debt management on his website:

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