Beating The Bank’s Debt Consolidation Trap
_Banks just love to lend people more money. They’ll increase your credit limits and they’ll happily ‘help’ you with debt consolidation and even debt settlement if your financial situation gets too severe.
Both of these options might seem like excellent ways to get rid of the debt burden hanging over your head, but are they really?
When you consider that the banks want you to stay in debt for as long as possible, the options they’re giving you to ‘help’ you cut down your debt are actually configured to make them even more profit for even longer periods of time.
Debt Consolidation – The Bank’s Way
It is possible to roll your outstanding credit card or personal loan balances together into one new debt consolidation loan. The interest charges are much lower than regular credit card interest charges, so on the surface you’re saving quite a lot of money each month.
Bank staff will happily help you to consolidate your current debts over to a debt consolidation loan and most customers are thrilled that they suddenly have extra money left over every month after the repayments are made.
While debt consolidation really can help some people with their debt reduction goals, the reality is the spending problems you have that put you into your financial mess in the first place were never addressed or fixed.
Almost 80% of people who take out a debt consolidation loan to get rid of credit cards or personal loans end up with even more credit cards 6 months later. Those people now have a debt consolidation loan to pay off and a couple more credit cards to pay for as well.
As the original bad spending habits were never fixed, the banks know they can continue to make more profit out of you by continuing to charge you more and more interest as you get further into trouble.
Making Debt Consolidation Work For You – Not the Bank
As mentioned in the previous section, it is possible to make debt consolidation work in your favor instead of the other way around.
If you’re already struggling to keep up with repayments on credit cards, consumer loans, or mortgage loans, then it is important to call your bank and ask if they will offer a form of debt consolidation loan. If they’re not willing to help you, call other banks until you can successfully consolidate your high-interest loans into a lower interest option.
Once your repayments have been reduced and your outstanding debts are gone, you should notice you have extra cash left over at the end of every month. Rather than spend this extra cash on consumer items, use some of it to make voluntary repayments off the balance of your debt consolidation loan. Use a little more of it to begin putting aside some savings.
Remember – this extra cash is money that you were paying to cover repayments not so long ago, so by re-allocating that same money to curbing and repairing your previous spending habits, you’ll be teaching yourself a new financial attitude that will mean you never have to repeat the debt trap cycle ever again.
Both of these options might seem like excellent ways to get rid of the debt burden hanging over your head, but are they really?
When you consider that the banks want you to stay in debt for as long as possible, the options they’re giving you to ‘help’ you cut down your debt are actually configured to make them even more profit for even longer periods of time.
Debt Consolidation – The Bank’s Way
It is possible to roll your outstanding credit card or personal loan balances together into one new debt consolidation loan. The interest charges are much lower than regular credit card interest charges, so on the surface you’re saving quite a lot of money each month.
Bank staff will happily help you to consolidate your current debts over to a debt consolidation loan and most customers are thrilled that they suddenly have extra money left over every month after the repayments are made.
While debt consolidation really can help some people with their debt reduction goals, the reality is the spending problems you have that put you into your financial mess in the first place were never addressed or fixed.
Almost 80% of people who take out a debt consolidation loan to get rid of credit cards or personal loans end up with even more credit cards 6 months later. Those people now have a debt consolidation loan to pay off and a couple more credit cards to pay for as well.
As the original bad spending habits were never fixed, the banks know they can continue to make more profit out of you by continuing to charge you more and more interest as you get further into trouble.
Making Debt Consolidation Work For You – Not the Bank
As mentioned in the previous section, it is possible to make debt consolidation work in your favor instead of the other way around.
If you’re already struggling to keep up with repayments on credit cards, consumer loans, or mortgage loans, then it is important to call your bank and ask if they will offer a form of debt consolidation loan. If they’re not willing to help you, call other banks until you can successfully consolidate your high-interest loans into a lower interest option.
Once your repayments have been reduced and your outstanding debts are gone, you should notice you have extra cash left over at the end of every month. Rather than spend this extra cash on consumer items, use some of it to make voluntary repayments off the balance of your debt consolidation loan. Use a little more of it to begin putting aside some savings.
Remember – this extra cash is money that you were paying to cover repayments not so long ago, so by re-allocating that same money to curbing and repairing your previous spending habits, you’ll be teaching yourself a new financial attitude that will mean you never have to repeat the debt trap cycle ever again.