With more and more people availing of debts to achieve their dreams and ambitions in order to pursue a lifestyle of their choice, debts have become a common phenomenon of every urban society, which in turn has consequently paved the way for popularity of debt consolidation programs. Undoubtedly, when you are experiencing a financial crisis, a debt consolidation would apparently seem to the most sensible approach. And with all the convenience, flexibility and advantages of low interest rates, tax benefits and only one monthly payment, debt consolidation has gained all the more recognition and appreciation. However, it may not always prove to be the right course of action due to the following drawbacks:

1. Certainly, debt consolidation offers you ease of making debt payments by reducing the interest rates and combining all your small debts into one loan, implying lesser monthly payments. But at the same time, this also means having to make payments for a longer period of time, which may prove to be comparatively an expensive affair in the long run. Depending on the amount of debt you have borrowed, you may find yourself making a big commitment of approximately 20-30 years.

2. 20 years is a quite a long span of time, during which many changes can take place. For instance, suppose if your debt consolidation company goes out of business, eventually to be overtaken by another, you may find yourself stuck in a rut. Such situations can not only be very messy but also very confusing and costly to deal with. It can prove to be even worse, if the new owner or company decides to reframe its policies and terms regarding the payments.

3. Debt consolidation loans do not necessarily promise you financial security. Along with debt consolidation, it is also necessary to practice good spending habits or you may find yourself in the same tricky situation, before you took a debt consolidation. A false sense of security maybe instilled in you because you may tend to assume that all your financial obligations have been taken care of and everything is under control.

4. Unsecured debt consolidation loans may not be able to pay off all your other debts, since the amount available for borrowing is usually very small. The amount will also depend on criteria like your financial status, income, credit history and credit score.

5. It may not be possible to pay every debt of yours with a debt consolidation loan. Although, the chances are comparatively better with a secured loan, there is still no guarantee that you will be allowed to roll all the debts into one.

Alternatives to debt consolidation.

At first, consider other means and try to pay your debts through alternative methods. When you are left with no option, only then resort to risky methods like debt consolidation. For instance, you can pay all your debts with a credit card but be sure to choose one that charges the lowest rate of interest. This will give you ample time and freedom to bring back your finances on the right track.

If you are finding it difficult to pay off the credit card debts, then begin by paying the debt of that card which charges the highest interest rate and try to finish it as fast as possible. Meanwhile, also keep paying off the rest of the cards with the required minimum amount. Once you have succeeded in paying off the first credit card, follow the same guidelines for the next highest interest rate credit card and continue doing so till you have eventually paid off the last one. And now that you have managed to pay them off, it would be advisable to relinquish them.