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After using my credit cards to pay for my extensive medical bills, I was suddenly drowning in debt. Thanks to the high interest rate on my cards, my balance continued to balloon. Desperate for a solution, I thought credit card consolidation would solve my problems, but it backfired terribly. That wasn’t the fault of debt consolidation; it was my own poor decisions that made it ineffective.

My situation isn’t unusual. According to Experian’s State of Credit report, American households have $6,354 in credit card debt, on average. With high interest rates, it’s easy for that debt to spiral out of control, so many people turn to debt consolidation for help.

Although credit card consolidation can be a useful tool to overcome your debt, it’s easy to make the same errors I did and end up in an even worse financial situation.

What is debt consolidation?

Debt consolidation can streamline your debt and help you save money. Through this process, you work with a bank or other financial institution to take out a loan for the amount of your credit card, medical or retail store debt. You use the new loan to pay off the old ones. Going forward, you have just one interest rate, monthly payment and due date to remember.

Debt consolidation loans tend to have lower interest rates than other forms of debt, especially credit cards. The lower rates can help you save money over the length of your repayment or get out of debt faster.

For example, pretend you had $10,000 in credit card debt with a 15 percent interest rate. If you had a minimum payment of $237, it would take you five years and one month to pay off your debt. Worse, you’d pay $4,300 just in interest charges.

If instead you took out a consolidation loan and qualified for a five-year, $10,000 loan at 5 percent interest, you’d have a monthly payment of $189 and would pay off your debt in five years, as well. However, you’d pay just $1,320 in interest. Taking just a few minutes to apply for a debt consolidation loan would help you save nearly $3,000.

Of course, those numbers only work if you pay off your balance on schedule and don’t rack up other debt. That’s where many people like me go wrong.

3 common credit card consolidation mistakes

Although debt consolidation loans can be useful, you need to have a plan in place before moving forward. Otherwise, you’ll end up with more debt than when you started.

Here are three common mistakes people make with consolidation loans and what you can do to effectively manage your debt.

1. You don’t have a budget

If you consolidate your debt and don’t have a budget, you’re likely to end up racking up a credit card balance again. Creating a budget might sound tedious, but without one, you won’t know how much money is coming in or going out. That leaves you susceptible to poor spending decisions and leads to more debt.

A budget allows you to identify the core causes of your debt. For example, you might find out that you’re overspending on dining out. By making some simple lifestyle changes, like cooking at home, you can reduce your spending and free up more money for debt repayment.

Solution: Write down all of the money you earn each month. Then, list all of your expenses, including rent, utilities, car payments, student loan payments, credit card bills, and subscriptions. Your income should outpace your spending, but if that’s not the case, you’ll have to cut corners or boost your earnings to balance your budget. Once you have a budget in place, stick to it and you’ll stay on track with your debt repayment.

Learn more about how to save money on a budget.

2. You don’t set up an emergency fund

When you’re paying down debt, it’s easy to become laser-focused on paying off your balance and neglecting savings. However, having an emergency fund is an essential safeguard against future credit card debt. Without one, you’ll end up charging sudden expenses — like medical bills or an unexpected car repair — on a credit card, starting the cycle of debt again.

Solution: While keeping up with your debt payments, aim to set aside a little money each month. Although saving three to six months of expenses might sound unrealistic, saving even just a few hundred dollars can prevent you from having to turn to credit cards. Start small and keep adding to your savings each month to develop a safety net.

Followed this plan to start and grow an emergency fund.

3. You don’t have a plan to pay off your debt

When I consolidated my debt, I expected it to do most of the hard work for me. Of course, that approach doesn’t work. Just consolidating your debt and making the minimum payments isn’t enough. Without a concrete strategy to pay off your debt, you’re likely to continue digging a hole for yourself.

Solution: Create a debt payoff plan that works for you. If your income isn’t high enough to keep up with bills and your loan payment, you need to come up with creative solutions, such as:

  • Cutting your spending: Ruthlessly review the budget your created and identify any extras that aren’t strictly necessary. End your subscriptions and indulgences until your debt is gone.
  • Launch a side hustle: If you need more money, consider picking up a side gig like delivering groceries, walking dogs, or baby sitting to bring in more income to go toward debt repayment. The average side hustler earns over $8,000 a year, according to a recent Bankrate survey.
  • Lifestyle changes: In some cases, you’ll need to take more drastic steps to pay down your debt, such as getting a roommate or ditching your car and relying on public transportation. Making these tough decisions might be hard in the short term but will have significant benefits later on.

For me, creating a side hustle was the most effective strategy for paying down my debt. By boosting my earnings by several hundred dollars each month through pet sitting, I was able to accelerate by debt repayment.

Tackling your debt

Credit card consolidation can be a valuable tool to manage your debt, but it’s important to address the root causes of your spending habits. If you decide that credit card consolidation is right for you, review offers from several different debt consolidation lenders to ensure you get the best rates and loan terms.