Do all your little credit card payments often lead you to consider looking for a simpler option? There’s always a debt-consolidation loan. Offers for these financial products are an e-mail box staple. They’re in every bank and on many of the cable television channels. Chances are you get at least twenty signals from advertisers everyday, suggesting this as the solution to your growing debt problem.

A major appeal of consolidation loans is convenience. Instead of paying twenty different creditors who are charging different rates at different times of the month, you take out one big loan, consolidate the debt and pay off all those accounts. Then you make a single payment on that loan once a month to service your debt.

Great Idea!

But ease doesn’t automatically translate to savings at all. There are two itty-bitty items to overcome when you take out a consolidation loan.

One: Is it really going to cost less?

Before you sign on the dotted line, be sure that the costs of the new bundled loan will truly be less than what you’re already paying the various creditors. When the Joneses convert their debt to a consolidation-loan, their current payment issues usually mean they won’t get the lowest-available interest rate.

When there is nothing to secure the loan (such as their home), expect the lender to bump the interest rate up. It’s the old bait and switch. Many lenders disguise this tactic with a lower minimum payment stretched out another year or two. This makes it look good until you figure the total cost, including the extra twelve to twenty-four months of payments.

Calculate interest and fees on all your existing accounts to determine the total of the payments you now make. Next compare those amounts with the consolidation loan numbers to make sure it’s really a better choice.

Two: Will you keep adding more debt because you consolidated?

The Joneses usually find themselves in the same shape within two years of their decision to consolidate the debt. The consolidation simply masked the real problem, spending more than they bring in.

The credit card accounts will seem empty. This gives the Joneses a false feeling about it being okay to simply charge-it. It happens innocently at first. Then they do it again. Before they know it, they are in worse shape than before.

Much of the text of this article originates from the book No Balance Due. It’s available at bookstores and most internet bookstores like Amazon.