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Consolidating my credit cards

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It’s typically a knee-jerk reaction as the debtor grasps at straws, but it doesn’t address how their lifestyle sunk them into debt.

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For-profit debt settlement companies negotiate with creditors on your behalf and charge you a fee, often a percentage of the amount of debt that is forgiven.Perhaps you were pouring too much of your income into basic expenses such as housing, car payments and living costs, and you need to evaluate ways to downgrade.In other cases, the problem could be as simple as reducing overspending on entertainment. Track your spending on a regular basis and evaluate the differences between your needs and wants. She says she prefers to work with clients for months to gauge how serious they are about repaying their debt.A debt management plan is an agreement between you, your creditors and a nonprofit credit counseling organization.Your credit counselor works with creditors to consolidate the full amount of your loans at a lower interest rate or for a longer repayment period (three to five years usually).If you don’t come to terms with what got you into debt, it could happen again.

Both Bossler and Lewis have seen it firsthand: Clients promise they won’t rack up insurmountable debt again, but within a few years they’ve returned to their old ways.

Tack a line of credit, car loan or student debt onto your string of credit card bills, and you can see why debt consolidation looks like a viable resolution.

“Somebody who considers [consolidation] is in over their head, reaching their limits on their credit cards and they’re experiencing financial hardship,” Kathryn Bossler, a financial counselor at Green Path Debt Solutions, says.

“But consolidation is just a temporary bandage for a bigger problem.” “It’s a tool and it’s not step one because nothing has changed,” agrees Carol Lewis, a certified financial planner who specializes in helping consumers get out of debt.

“By itself, debt consolidation won’t do anything for you.” Tread carefully, the experts say, or you could end up in more financial trouble.

Here are six common debt consolidation mistakes consumers make and how to steer clear of them.