When your debt seems insurmountable, the never-ending stream of debt consolidation offers can seem not only ideal, but life-changing. Offers boast promising statements like lowering your interest rates, decreasing your monthly payments and keeping creditors from continually pestering you.

Unfortunately, these promises are sometimes too good to be true. In some cases, debt consolidation is simply not the answer you may have hoped it was.

When is debt consolidation not recommended?

Whether consolidating your debt is a viable option to help with your debt will depend completely upon your individual situation. Debt consolidation is meant to allow more room into your everyday budget, enabling you to financially get back on track. Generally, there are several instances in which debt consolidation could cause further harm, rather than relief, to your finances:

  • Your debt is part of a larger problem. If debt consolidation is a temporary solution to a larger, perhaps habitual issue of accumulating debt, you may need to consider other, more lasting solutions.
  • Your debt comprises more than half your income. As debt consolidation is not typically recommended for those with a small amount of debt, it is also not recommended for those with a particularly large amount.
  • Your payments will continue for over five years. Paying off consolidated debt payments should ideally take no more than six months to a year. If your payments will last over five years, pursuing debt relief may be better for you.

The risks may outweigh the rewards

Debt settlement companies can offer such low rates and payments by withholding payments from lenders for an extended period. When collections departments are eventually responsible for collecting your debt, they often reluctantly accept some payment over nothing. After months of no payments followed by records of settled accounts on your credit report, your credit score can be significantly damaged for years.

If you find yourself considering debt consolidation but are unsure whether it could help or harm you, discussing your situation with a bankruptcy attorney can be beneficial. Other debt relief options, including bankruptcy, could be both quicker and cheaper than consolidation. While bankruptcy may seem like a last resort option, it can offer a more long-term financial solution in many situations.