Some people struggling with debt will consider debt consolidation as a way to alleviate their burden. By combining multiple debts into one, it is possible to simplify a debt load and secure a more favorable interest rate or reduce monthly payments. But debt consolidation is no guarantee you will escape your debt. Going this route might even lead to an unhelpful frame of mind.
It is understandable that you want to relieve the stress brought on by your debt load. And while debt consolidation may improve your emotional health by making your debt more manageable, it could also hinder your efforts to become debt free.
The emotional impact of debt consolidation
As The Motley Fool explains, going through debt consolidation can produce emotional euphoria because you have rid yourself of high-interest rates or have reduced the pressure to pay multiple creditors. However, the sudden relief you feel may produce “debt amnesia,” meaning you forget what it was like to deal with your debt.
As a result, you could feel that you have nothing to worry about now. You may think you suddenly have more money than you actually have just because you reduced your interest rate or your monthly payments. Some people in this situation spend a little more with their credit cards or even splurge. All of these actions will just add more debt and dig a deeper financial hole.
Debt consolidation is not the end
Consolidating your debts does not make them go away. It just makes it easier for you to pay them off. Forgetting this fact could lead to irresponsible spending. You might even risk violating the terms of your debt consolidation if you rack up more debt and cannot make payments.
There are certain advantages to debt consolidation, but it generally works out if you have the finances to pay your debts after you combine them. You might require a different option such as bankruptcy to rid yourself of crushing debt and set you back on a path to solvency.