6 Common Debt Consolidation Pitfalls
Before you consider debt consolidation you should know what you are getting into and the common pitfalls that individuals fall in.
Debt Consolidation Pitfall 1:
Thinking you are actually making progress. Many individuals will have the feeling of accomplishment after debt consolidation. They think that they are in a better financial place, but the truth is the money was just money was just moved around. The money you owe is still the same and you actually might of paid extra just to transfer the funds. You should think of it no different before you did it.
Debt Consolidation Pitfall #2
Not taking advantage of the lower monthly payment and interest. The whole goal of debt consolidation is get you a better interest rate and get a lower monthly payment. And if you don’t take the money you are now saving and re-apply to the balances you will not realize the benefit.
Debt Consolidation Pitfall #3
Adding back the debt on the accounts you just consolidated. This is very common and has to do with the feeling of progress discussed in debt consolidation pitfall #1. Once you have consolidated your debt you should either cut up those cards or hide them so you don’t use them again. Once again don’t think you are actually are making head way.
Debt Consolidation Pitfall #4
Thinking this will help your credit standing. In regards to your credit score, debt consolidation might hurt it. It really depends on the method you use but if you use credit card debt consolidation more than likely your credit score will be lower. This result is because you credit score takes into account each individual account’s utilization and the higher the utilization the larger the risk you represent.
Debt Consolidation Pitfall #5
Another scary mistake is paying late to your accounts. Many debt consolidation agreements come with strict stipulations that often state one late payment will cause a hike in that low interest rate you just got. Also, it does not have to be this account. Many agreements state if you make one late payment to any accounts, you could be subject to a change in your interest rate on this consolidation.
Debt Consolidation Pitfall #6
If you go into debt consolidation thinking it is going to solve your problem, it won’t. Your problem is lack of budget and discipline in spending. You need to develop a plan for yourself and see this as only a method to help you to get out from under your credit cards.
No related posts.
Related posts brought to you by Yet Another Related Posts Plugin.
Tags: debt consolidation
Posted in Uncategorized
Leave a Reply
Trackbacks