Posted on March 14, 2009 at 7:01 pm I have a friend who consolidated all her debts onto her mortgage. She had three credit cards and a car loan. They're now on the mortgage. She thought she'd 'paid them off' - but in reality what she did was ruin her available equity, increase her mortgage so it will now take longer to pay off and then the stupid woman went straight out and applied for a new credit card. That was six months ago. She called me last month crying that her mortgage is underwater. (I helped her fix that problem since then, but only by increasing her house value). She was crying that she can't afford her repayments on her 4 credit cards and her new car loan. So she figured she'd have to sell the house to survive. How silly is that? I suggested she sell the car, because this will only reduce in value every year she has it. It's pointless and way to expensive for her income anyway. I helped her put a lot of junk on ebay that she had sitting around doing nothing in boxes. I helped her organize a yard sale for other items. After all - if she loses the house she won't need any of those things anyway ;) What this means is that debt consolidation gave her false belief that she was doing fine financially. Putting all her debts onto her mortgage taught her that she doesn't need to be responsible for her own debts - she can just consolidate them and they magically go away. She never learned to take responsibility and actually pay back the things she bought. Because debt consolidation is a quick-fix solution, it never fixes the bad spending habits that got her there in the first place - and those bad spending habits are what needed to be fixed FIRST in order for her to ever pay off her debt.

Posted on March 19, 2009 at 10:23 am Isn't it amusing how no one ever comments on posts that actually point at taking full responsibility and accountability for your actions? Would you all prefer if I wrote "go ahead and take out more debt"? or something like "buy whatever you want. You won't have to pay it back"? It's becoming very noticeable on this forum. :(

Posted on March 21, 2009 at 10:24 pm To be, debt consolidation is a last resort for large loans. For small loans, I just pay them off individually and it works out fine. Your friend should never have consolidated her debt if she didn't know how it worked. By the way, how is she now?

Posted on March 22, 2009 at 2:16 pm I think it depends on the attitude in cases like these- people need to remember bundling loans together doesnt mean you can sweep them under the carpet .xox emma

Posted on March 22, 2009 at 3:22 pm She was very foolish adding more to the value of her mortgage. Most people are trying to get their mortgage paid off as soon as possible but instead they seem happy to add to it. If she had admitted to an took responsibilty that her spending was way out of hand, and tried to change it she would be better placed. I cant believe she moved her credit card debts and then went and got another one again. Crazy, some people never learn from their mistakes.

Posted on March 22, 2009 at 10:44 pm Unfortunately for a lot of people they have to 'hit bottom' to make those changes! Hopefully some of us will learn from this post so they don't hit rock bottom before changing their ways!

Posted on March 24, 2009 at 4:35 pm Maybe if she got the right instructions from the beginning none of this would happen. Maybe if the bank explained to her what consolidation may result to, she wouldn't go for it. But even that many people find it a very last result rather than bankruptcy.

Posted on March 26, 2009 at 1:08 pm Unfortunately, for your friend, she didn't learn new and better spending habits. Instead, she got rid of one debt and immediately acquired more. I wouldn't be surprised if she has the same trouble this time next year from new debts.  Your friend should learn how to manage money better and not simply rely on generous friends, such as yourself. Your friend is lucky to have a good friend like you! Thanks for sharing.

Posted on March 29, 2009 at 5:08 am debt cosiladation is a dangerous thing, i have never done and from what i have heard that is the best way to do it. for smaller loans i try to pay it off as quickly as possible

Posted on April 1, 2009 at 6:29 pm I had a friend who did something similar. She went and had her home refinanced and in the process consolidated alot of her debt in to the loan. Not the worst idea in the world, but this is where it backfired.She went right out and took the credit cards she just payed off and maxed them out again. So all she ended up doing was raising her mortgage and not eliminating any bills, in fact, she added about an extra $6k to her total debt in the process.She ended up selling the home and moved in to a home that cost her alot less and paid off the cards, again, and is now under strict observation my her husband on the credit cards. She doesn't even carry them with her now. He uses them for gas, thats it. I understand the urge she had to go out and spend the money but considering everything she went through with the refi, she really should have put more consideration when handling those credit cards.