Debt consolidation can work well for many people, but beware that it is not a surefire way to get out of debt. It can be a lifeline to struggling borrowers, but it does not correct problems like overspending that may have put you in debt in the first place.
Many people are not aware of how their expenses stack up against their income. It is easy to make assumptions that your next tax refund or overtime hours will help you to catch up on your bills, when, in reality, you’re consistently spending more than you make.
Another pitfall to avoid is the fact that many people seeking debt consolidation can wind up with debt settlement companies that promise to persuade creditors to accept less than they’re owed. This process can cause a major hit to your credit score, and some companies can literally disappear with your money.
Debt consolidation may be an option for you if you stop using credit cards, commit to a budget, and save for emergencies so you are prepared in the case of an unexpected expense. You also need to be able to pay off the debt you owe within three to five years. Otherwise, it is best to consult a credit counselor or a bankruptcy attorney to discuss your long-term options.