Debt Consolidation, Who Wins?

As far as I'm concerned, there is only one thing that anyone should do regarding debt consolidation - that is, if at all possible, stay away from it!



I know that when this article appears in an article directory, and maybe even on my blog, that the Google ads will soon start showing great deals that you can get to minimise your debts. I must admit that at times, it can be very tempting, and that in some cases may even work.



However, consolidating debt isn't getting debt free - it can be a step along the way, but only if the money that is freed up is spent releasing further debt.



Human nature being what it is, many people tend to spend the 'extra' money on consumer goods that they can now 'afford', or they may even go into new debt. This defeats the purpose.



Getting debt free involves developing a whole new mindset, and borrowing money usually doesn't achieve the required result. Refinancing deals are always balanced in favor of the lender, and if they weren't, there wouldn't be anywhere near the number of firms competing for this section of the market.



Taking out a new loan means paying interest over a longer period, as well as the cost of payout costs on previous loans, and the interest that had already accrued on them.



When considering a debt consolidation loan, one needs to stop and ask exactly why they are heading down that track. It is easy to get excited, enjoying the thrill of the prospect of more disposable income, but a month or six down the track, if you spend up again in the meantime, is when the reality will set in.



Often, paying it back isn't as easy as first thought.



Before considering debt consolidation, have a look at your budget, and check for money leaks. Do you have a subscription that you are still paying for, but not using? Cancel it, and save some money! I recently realized that I had a small isp account still active, that was draining my money for the sake of the convenience of retaining the email address. It's cancelled!



How about transport costs? A well tuned and serviced vehicle costs less to run and maintain, and will likely have fewer major mechanical problems then one that isn't.



Looking for areas of waste, saving money and paying it out on bills can go a long way in helping to get out of debt. A major reason for refinancing is simply to cut the number of payments that have to be made on a regular basis, and is very understandable.



Try saving money in different areas, and paying it out on the smallest debt first. Once this debt is dealt with, pay the extra money, and the money that you were paying on that debt towards the next one, and so on. This can take a bit of time, but has a snowball effect as each debt is paid.



The effect isn't just financial, but reflects on your self esteem as well. Being in debt can affect relationships and cause added stress. Paying out the bills not only relieves stress, but brings a new sense of empowerment and personal freedom as well.



Making extra income, either online or working an extra job maybe handy, but as Robert Kiyosaki says, a well paid slave is still a slave, and until one cuts their spending, and gets out of debt, that is what they will remain!



To summarise: track where your money is going, cut wasteful spending, use the money saved to pay out debt and begin a savings plan, and you may find that you will become debt free without the burden that a new loan could possibly bring through undisciplined spending.



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