To understand why, consider the difference between your mortgage and your credit card.
Once you have agreed to the debt consolidation plan, you can’t go back, so it’s important to understand the potential consequences first.
The fees and interest rates can end up being very high – especially if you have fair or poor credit.
Since most people struggling with debt do not have excellent credit scores, they’ll have to pay high interest rates and fees which will burn a large percentage of their total cash flow each month. Furthermore, even if you get what seems like a good interest rate, there is still a significant risk involved in dealing with a debt consolidation company.
You also must be careful not to continue using more credit (with credit cards) after entering the debt consolidation program.
Otherwise, you’ll end up with the same amount of debt – or more.
Your repayment plan might be much longer, which could cause you to pay more interest over the life of the loan even with a lower interest rate than what you had before.