The term “debt consolidation” is being heard more and more often these days, as interest only loans choke the last pennies from debt-ridden families, and many have to rely on credit cards to make ends meet.  The result of plastic oriented consumerism is a budget that is stretched to the max, and most folks at some point realize that something has to give.  It is usually at that point that the term debt consolidation enters the picture.

Consolidating debt is usually a first thought that cross many debtors’ minds. After all, a consolidated debt may have substantially lower interest rates and therefore a much lower payment than all your various creditors are asking you to pay on a monthly basis.  While at face value this might look like a good solution, there are some times when debt consolidation is not the right thing to do.

Everyone carries some kinds of debt.  Many carry large debts on their homes.  These will take 30 years to pay off.  Others carry large debts on their cars, yet these are usually paid off within about six years.  Some folks, however, carry burdens of debt that are neither tied to an asset, such as a house or car, nor do these debts have a specified date on which it is considered to be repaid in full.  Others have accumulated a lot of intellectual property, but these years of schooling have left a significant financial dent in their overall budget.

You have opened your recent credit card statement and thought that just before you ripped the envelope open you could hear a drum roll.  Yes, you were perhaps a day or two late on a few of the payments, and now the credit card company has exercised its option to raise your rate. You may be looking at a whopping twenty-five percent interest rate, and if your balance is right around $10,000, your finance charges are sure adding up.  Add to this the late fees, and an assortment of other fees and charges, and it appears like you are going backwards every month, instead of forwards.