A debt consolidation loanis a loan you get to pay off other debts. If you owe balances on three different credit cards, a debt consolidation loan combines all of your credit card balances into one loan, so you only have one monthly payment. That’s great if it reduces the interest you pay, because it will save you money.
But beware of the debt consolidation loan trap: if you pay off your credit cards, stop using your credit cards! Otherwise you will be tempted to use your credit cards, and if you start building up your balance again, you will be stuck with more debt: your debt consolidation loan, and your new balances on your credit cards. That’s the trap.
So, if you get a debt consolidation loan, pay off your credit cards, and then cut them up, so you can’t spend any more money.
