Among the other types of debt relief, this has a high percentage of people who are unable to achieve debt freedom. It can be because they were unable to complete the program or it can be caused by backsliding into more debt. While the completion rate is low, it is unfair to assume that the whole program is flawed. It is an effective way to achieve debt freedom but the thing is, you have to know the right habits to implement and the pitfalls to avoid.
Unlike debt settlement or bankruptcy, debt consolidation requires the consumer to have a steady income to support their debt payments. This method of paying off debts will only combine your different debt accounts so that paying off what you owe will be more manageable. Although a lower monthly contribution is oftentimes enjoyed, it will not reduce the total amount of debt. You will still end up paying the whole amount that you owe your creditors. The lowered payments becomes possible because the balance is distributed over a term that is longer than your current.
The low monthly payment, longer term and the lack of debt reduction makes for a slow going debt payment. This makes for a scenario that can easily bring discouragement to the debtor. If you want to avoid this, you have to create a payment plan that provides encouragement through pre-determined milestones. These will mark small successes for you and should be partnered with a reward that will help motivate you.
Once you have dealt with the possibility of discouragement, there is another issue that you have to work on – putting yourself further in debt.
Although effective in paying off your creditors, debt consolidation has a high chance of putting someone further in debt. The single payment method is sometimes perceived as a false sense of solution. The ease is a double edged sword. You end up feeling like your debts were not as bad as you thought it was and that may give you the false excuse that you can borrow some more. For instance, when you use debt consolidation loans to pay off your credit card debts, all your cards will be back to zero balance. That makes it very tempting to use. Remember that you haven’t really paid off your debts. You just shifted it so that it becomes easier to manage so you can concentrate more on growing your income for your debt payments.
Debt relief takes some form of adjustment. If you got yourself in debt. That means something was wrong with your old lifestyle. Make sure you implement the right adjustments by practicing the right financial management skills. Also, give yourself some allowance during the first 30 days. A drastic change may take its toll on you. If you think that cutting back on your usual expenses is needed, go at it slowly. It’s similar to how crash diets don’t always work. Make the changes but also ensure that you can commit to them. That is how you make debt freedom last in your life.