Three Bad Debt Consolidation Actions

Debt can often produce a downward financial spiral. Being heavily in the red can prompt some desperate actions, including these three bad debt consolidation moves.

Money management isn't easy, especially when you're trying to manage a heavy debt load. For people who find themselves deep in debt, fighting their way out of the red and back into the black can be a long, difficult process. Contrary to what many debt consolidation experts might say, there are no easy shortcuts.

Here are three debt consolidation actions that these so-called experts promise will get you back on your feet again. Approach each of these with extreme caution, knowing that the best way to get back on your feet is through sound money management and disciplined spending.

1. The debt consolidation loan

A debt consolidation loan can actually be a good solution in certain situations. A home equity loan, for example, can help consolidate balances on credit cards that charge astronomical interest rates. A home equity loan also provides tax-deductible interest rates.

However, the catch with debt consolidation loans is that you're spreading your payments out over a longer term. This will help lower your monthly costs, but it will cost you more in long-term interest. Over time, you could wind up spending thousands of extra dollars. Debt consolidation loans also may include a hefty fee, which will only add to your debt. You might be far better off aggressively trying to pay off your debts as quickly as possible.

2. Debt consolidation counselors

The marketplace is filled with debt consolidation counseling services. They'll promise to help you lower your monthly payments with a quick debt consolidation loan. They may also offer to negotiate with your creditors to lower your monthly payments.

While there are some good non-profit credit counseling services on the market, you'll want to steer clear of their aggressive debt consolidator counterparts. You can perform many of their services yourself, including contacting your credit card company and re-negotiating the terms of your repayment. If you feel that a debt consolidation loan is needed, check with a trusted bank or credit union for a loan that will come with a lower interest rate and a smaller fee.

3. Zero-interest rate balance transfers

Your mailbox is undoubtedly stuffed with zero-percent interest balance transfers. The premise is simple-transfer your credit card balance over to their account, and you pay zero percent interest for an introductory period, generally six to nine months. This is a great short-term move, but don't do it unless you can pay off that balance within the introductory period. If you can't, the interest rate will spike, and you'll wind up paying through the nose.

Desperate times can lead to desperate measures, especially when it comes to debt consolidation. If you're in debt, try to avoid the temptation of quick-fix debt consolidation solutions, especially these three ill-advised actions. Instead, adopt a long-term perspective. It's the best way to pay down your debt.