With student loans, credit card debt, and mortgages, consumer debt is at an all-time high and sometimes it can feel like there is no way out. Debt consolidation provides the opportunity to combine multiple debt accounts (loans, lines of credit, credit cards) with different interest rates and repayment terms and dates into one single loan with one payment date. When choosing a debt consolidation plan, it’s important to be realistic about your needs, how much debt you need to consolidate, and your other financial obligations to make sure you receive a plan that works for you. Asking for help when needed and making a detailed plan can help you avoid these common debt consolidation mistakes.
Not Changing Your Spending Habits
Debt consolidation plans don’t change your spending habits. If you don’t address the root of the problem, either you’ll complete your debt consolidation plan and then create more debt or you’ll have the lower monthly payment and create debt somewhere else in some other way.
Listening Too Closely a Friend
No situations are the same and just because it worked out for a friend, cousin, co-worker or sibling does not mean that it will work for you. You need to make sure your specific needs are being met by whatever debt consolidation plan you agree to. It has to work for you: logistically and financially.
Not Researching All Options
If you are looking for an unsecured method of debt consolidation (one without collateral), you will need a strong credit history with solid financial backing. If you have equity in your home, tapping into that may be cheaper than seeking out a debt consolidation loan or plan. Credit counseling is also available if you can meet your current repayment requirements but need a little guidance and outside perspective.
Not Shopping Around
After choosing the right solution, shop around to make sure you choose the right people to work with. In addition to comparing fees and costs, consider how they treat you and your financial situation. Are they guiding you towards a good solution that fits your needs? Are they kind?
Debt consolidation can be an excellent tool to help you get a handle on your finances so you can be in a better position in the future but it requires planning. Contact Revenue Park LLC to learn more about our debt consolidation services.