Bills Logo

5 Debt Consolidation Mistakes to Avoid

5 Debt Consolidation Mistakes to Avoid

Get rid of your debt faster with debt relief

Choose your debt amount

See if you qualify

Or speak to a debt consultant  844-731-0836

Daniel Cohen
UpdatedJul 17, 2024
  • clock icon
    5 min read
Key Takeaways:
  • Debt Consolidation is the best choice for many people.
  • People make the same mistakes, regardless of the type of debt consolidation program they use.
  • Maximize your chances for debt consolidation to help now and in the long-term.

Debt Consolidation: Avoid Mistakes

Consumer debt is rising. At the end of the first quarter of 2017, consumer debt in the US hit an all time high.

If you are carrying a significant amount of debt, it is smart for you to look at ways that can reduce your costs, so more of your money goes to pay off your debt. Debt consolidation is a smart choice for some people. It doesn’t matter if you have a good financial situation or if you are in a financial hardship. There are a wide range of debt consolidation options available.

Don’t get tripped up by how the term "debt consolidation" is used. It isn’t important if it is used to describe a debt consolidation loan or a professional debt relief program. Your responsibility is to find the consolidation approach that best fits your specific situation.

Choose the Right Debt Consolidation Method

Be methodical in your approach. Make a realistic assessment of your current situation, understand how the different consolidation options available work, and choose one that benefits you that you can afford to see through to completion.

The most common and important reason to consolidate your debts is to save money by lowering your interest rate, reducing your costs for borrowing. With excellent credit you can consolidate debt using a balance transfer offer or you can qualify for an unsecured debt consolidation loan. If you have enough equity in your home, you can get an even better interest rate on a mortgage than on an unsecured debt consolidation loan.

Some debt consolidation options are aimed at consumers who are struggling and who lack the excellent credit or equity to qualify for a debt consolidation loan. Credit counseling and debt settlement programs are sometimes called consolidation programs, probably because both consolidate your monthly payment, so you only make one payment per month. The key difference is that unlike a debt consolidation loan, you still owe your original creditors until the credit counseling or debt settlement programs are completed.

Debt Consolidation Options

Not sure which debt consolidation option is right for you? We have screened debt relief providers who can help you get a no-cost debt consolidation estimate.

Common Debt Consolidation Mistakes

There are some common debt consolidation mistakes people shopping for any kind of debt consolidation make. Avoid these and you increase your odds of finding the right approach to help you, completing it successfully, and putting your debt behind you.

Following a friend

"It worked for me!," your friend says about a debt consolidation solution that worked for them. Personal recommendations are valuable, but don’t let your friend's experience lead you to choose the wrong solution. Just because it worked your friend doesn’t mean that it will for you. Even if it “works,” is it the best solution for you? You and your friend may have different goals and financial capabilities. He may need the lowest possible monthly payment and be willing to take a hit to his credit in order to get out of debt. If your priorities are different, you want to find the solution that is best for your situation, not one that works best for someone else.

Inability to finish what you start

You may be so desperate or eager to get a change in direction going that you commit to a solution that sounds good, and is effective, but stretches you so far that you find that you can’t make the payment each month. Don’t commit to a solution because you want it to work. Be realistic about your ability to make the required monthly payment. A common reason for a debt consolidation program to fail is that the client drops out due to inability to keep up with the required monthly payments. Don’t bite off more than you can financially chew.

Not researching all your options

If you are looking for a debt consolidation solution, if you don’t look at all the options, then you may not find the best one for your situation. Unsecured debt consolidation loans require strong credit in order to qualify. If you have equity in a home, a cash-out refinance requires only good credit. If a debt consolidation loan is not available, looking at credit counseling and debt settlement makes sense. There are pros and cons to each, so weigh them carefully.

Not shopping around

Once you find the right solution, you need to find the right people to work with. Many consumers only speak with one company. If they feel comfortable with that firm, why bother speaking with someone else and going over all the details about carrying too much debt? That is a conversation that is not easy for most of us, as admitting we need help or that our debt is out of control is embarrassing. Well, don’t let your fear or reluctance stop you from comparison shopping. Whatever solution you are considering, it is crucial to speak with more than one provider. It is not just about comparing rates and fees, but also the way that you are treated and how your questions are answered that will help guide you in the right direction

Not addressing the root cause

Even if you wiped out your debt today, magically, if each and every month you are running up new debt, it is only a matter of time before the debt grows out of control. That means that even an effective debt consolidation approach requires getting to the bottom of what caused you to accumulate debt and making changes. It is not easy to make big changes and, when it comes down to it, there are really two ways to avoid debt for the long haul: cut spending and increase income.

Don’t avoid using a debt consolidation loan or program that can speed up the time it takes to get out of debt. Those who say ‘you can’t borrow your way out of debt’ miss the point. What you can do, if you qualify is lower your total costs to repay the debt, moving into a position to build an emergency fund, savings, and investments sooner. Combine that benefit with creating a solid plan for not running up new debt and you will have married the best of both worlds.

Struggling with Credit Card Debt: Get a Free Debt Consultation

Are you struggling with debt but don't want to make mistakes? Contact one of’s pre-screened debt help providers for a free, no-obligation debt relief quote.

Get rid of your debt faster with debt relief

Get rid of your debt faster with debt relief

Take the first step towards a debt-free life with personalized debt reduction strategies.

Choose your debt amount

Get started now

Or speak to a debt consultant  844-731-0836

Struggling with debt?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

Collection and delinquency rates vary by state. For example, in Montana, 14% have student loan debt. Of those holding student loan debt, 7% are in default. Auto/retail loan delinquency rate is 3%.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.