It’s easy to get all caught up in the financial benefits of debt consolidation. After all, the reason why people go through the consolidation process in the first place is to get out from under the crushing monthly bills that they have to deal with.
Nothing is more depressing than seeing tons of bills that amount to a huge amount of cash every single month. It seems that you’re trapped. It seems that no matter how many times you get a raise at work or how many times you get promoted, you still have this huge crushing debt.
It’s easy to rejoice when you see that huge monthly amount reduce to something more manageable. While that is worthy of celebration, keep in mind that there are also many non-monetary benefits of debt consolidation. If you’re considering going through the consolidation process, you might want to get a clear idea of what these other benefits are. They definitely will help you get a clearer picture of what’s in store for you if you go through the consolidation process.
Debt consolidation is not a magic bullet. It’s not going to make all your money problems go away. If you are like the typical American consumer who has certain bad financial habits, chances are you will end up in a deep financial hole yet again. You can go through the pathetic process of consolidating your debts, racking up more debt, and consolidating that again. This is very frustrating. It can go on forever and you’re not really doing yourself any favors if you go through that process.
It would be much better for you to get a clear idea of the non-monetary benefits, so you can see the full picture as to how debt consolidation can help you on many different levels. We’re not just talking about making your immediate financial obligations go away. It can also benefit you in more profound ways.
First things first, before we talk about the benefits of consolidation, please understand that this process should not be your preferred solution. The problem with thinking that consolidation is some sort of magic bullet that would make all your personal financial issues go away is that it’s too easy to get addicted. It’s too easy to imagine that there’s this legal and financial reset button that you can press whenever you feel pressure.
The problem with that is that it can easily lead to some sort of dependency. Instead of you taking concerted efforts in setting your financial habits in order, you end up becoming dependent on a quick fix. You have to remember that debt consolidation actually doesn’t forgive your loans. In fact, none of the principal amount goes away. The only reason why your monthly repayment amounts decreased is because the overall timeline of all your loans have been stretched out.
If anything, the lender is the big winner here because instead of them having to settle for zero money because you declared bankruptcy, they’re actually going to be earning more money from you over a longer period of time. Do you see how this all works out?
It’s really very important to establish at this juncture that debt consolidation should not be your preferred solution. It should not be at the top of your list.
Another reason why consolidation should not be your go-to solution is because it costs quite a bit of money. There are many consolidation consultancy services out there, but while a lot of them are organized as non-profits and non-governmental organizations, they’re still organized to make money. Sure, they account for the money in non-traditional ways or non-obvious ways, but it’s still all about generating revenue.
If you need proof of this, you only need to look at the fact that they can charge quite a bit of money. It follows then that consolidation should be an option that you take only after you’ve given enough consideration into your other options. Maybe you should consider getting a raise, so you can make more money to take care of your liabilities and expenses. Maybe you should consider taking an online job, like freelancing or building and operating websites to generate passive income.
Whatever the case may be, always understand that when it comes to personal finances, there are always two sides. You can obviously focus on your outflow and try to reduce that or you can maximize your inflow or income, so you have more resources at your disposal to make your financial obligations go away.
The less obvious benefit of consolidation is actually quite counterintuitive. The less obvious benefit is that it frees up your emotional landscape in terms of stress. Instead of feeling that there is this financial sore hanging over your hear at the end of every month, you have more room to breathe. The problem here is that most American consumers read this as permission to spend more money. They look at it as another opportunity to whip out the plastic and buy stuff that they don’t really need. That’s not how you should look at this situation.
If anything, being able to breathe more freely at the end of every month should push you to start thinking hard about ways you can boost your income or otherwise supplement your inflow, so you can have more resources to use in knocking out your overall debt load.