Debt consolidation is one of the most popular personal finance strategies used by countless Americans to reduce their debt burden. It involves rolling high-interest debt into one new loan with a much lower rate, so payments can be more easily managed.

Generally, debt consolidation might sound like a good idea since it can free up money in your budget for other things. But there can be some hidden downsides and risks that make the decision to consolidate not worthwhile for everyone. Here are some of the potential dangers of debt consolidation that you should consider before you go ahead with it.

The first potential downside to debt consolidation is that it can actually backfire by encouraging you to overspend. If your debt consolidation loan frees up some money in your budget that you did not have before, it might be tempting to use it to buy things you don’t need or to live more lavishly. This could prevent you from achieving your financial goals since you are increasing your debt burden.

Another risk that comes with debt consolidation is that it could stretch out the length of repayment. Consolidating your debt into a longer loan in exchange for a lower rate might look like a great deal in the short-term however if you keep making minimum repayments for the duration of the loan you might end up paying more than if you had made regular repayments on the original loan. In addition, consolidating debt can lead to paying more interest in the long-term, which can lead to more debt in the future.

Finally, debt consolidation can also involve hefty fees and charges. Make sure to understand all the fees associated with the loan. Your debt is likely to be higher after consolidating as these fees and charges are added onto the amount you owe.

Debt consolidation can be a good strategy for those with unmanageable debt but it’s important to consider the potential risks. Before jumping into debt consolidation, take your time to calculate the real cost of the loan and make sure that the benefits outweigh the costs. If consolidation still seems like the best option for you, make sure to look for the most favorable terms and look beyond just the interest rate.