There are plenty of loans available to consumers today with fair, good or excellent credit. Credit cards are easy to obtain and personal loans help cover large vacations or home improvements. But occasionally we start to get carried away with spending and use loans to help dig ourselves out. Unfortunately, this method is often more damaging than people realize.
Easy credit often means easy spending. Why wait to save up for something when you can buy it now and pay for it later? Consumers buy and rack up balances on credit cards. Even more conservative consumers can get in trouble with medical bills or student loans.
As the debt piles up, the consumer tries to fix it. Credit cards offer low or no interest for certain periods of time, so you open one and transfer your balance. Now you can really start paying off some debt! But you can’t clean it up in time and the introductory rate runs out. Now all of the finance charges you were avoiding come barreling back at you, but often with twice the interest rate of your last card. Your same payment does nothing but pay off the interest that accumulates every month.
So you go to a service that consolidates and helps pay off debt. Now, with their help you will combine all of the debt into a simple payment and make progress on whittling it down until it disappears for good. At least it should.
These layers of debt are called pyramids. When you open an account, even a debt consolidation account, to pay off another one, you’ve just built a pyramid. And pyramids can be dangerous.
Buy opening a new personal loan or credit card to pay off an older debt, you might have better terms and the ability to do more with your payment. This is definitely a good thing. The danger comes from the card left behind.
If you’ve built up enough debt to now be having trouble paying it off, it is likely you will continue to spend. An empty credit card will not stay empty long without help of some kind. Perhaps the best help for situations like this is a pair of scissors.
Pyramid the Right Way
If you’re serious about cleaning up your debt, you need to do it in a serious way. Go ahead and get a personal or debt consolidation loan. Transfer your balances and set up the new monthly payments. Then close your old accounts and cut them up. If the accounts are closed, you can’t do any more damage.
To get rid of debt, you must change your lifestyle. It takes more than a new monthly payment to make a difference, but with the right attitude and the right pair of scissors, debt consolidation and pay off plans can definitely be successful.