Too many people fall into the same debt consolidation mistakes. Don’t be one of them by being aware of these mistakes.
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Being in a position where you need debt consolidation is in itself trouble enough. It becomes even worse when you are unable to properly evaluate your financial situation or budget effectively.
To avoid causing even more strain to your finances, it’s good to be aware of these common debt consolidation mistakes so that you yourself can avoid them.
- Not asking yourself “Why am I in this situation?”
Yeah that’s right. You got yourself here so you should at least take the time evaluate why you’re in this situation in the first place.
Is it because you have more credit cards than you can handle?
Are you a happy go lucky spender? Can’t resist the siren call of malls when they announce a sale? Whatever it may be, determine what the root cause of your debt is and take the appropriate steps to fixing it.
Getting your debt consolidated and paying it off may help you out temporarily, but you’re only going to put yourself in the same position again if you don’t deal with the issues that got you into deep debt in the first place.
- Settling for a terrible debt consolidation company
This one’s pretty obvious but when you’re in a situation where you’re desperate for any financial relief, you will take whatever debt agreement you can get. Sadly, even if it’s with a debt consolidation company that doesn’t have your best interest at heart.
This is one of those moments where you need to give yourself a metaphorical slap in the face and take the ‘desperation-coloured glasses’ off so you can see your situation logically for what it is.
You don’t want to be worse off than you were before. Even in a less-than-ideal situation such as being in debt and near bankruptcy, you should still set some standards in choosing a debt consolidation company –one that is legitimate, reputable, and will genuinely want to help you get out of debt.
It pays to do your research; check for interest rates, public records, scams, and research websites. Companies that try too hard to sell you their product or overpromise should be avoided at all costs.
- Consolidating ALL debts
We get it, it’s easier to pay one debt rather than pay multiple debts every month. The main perk of a debt consolidation loan is you get to simplify all your debts and have them all condensed into one monthly payment. But –yes, there is one big “but” here –you don’t really need to consolidate ALL your debts.
It doesn’t make any sense to include one that already has a low interest rate.
Sure, it’s convenient to only make one payment every month, although from a practical perspective you are better off keeping that other debt separate rather than have it consolidated only to pay a higher interest rate. Not worth it.
- Using your credit cards before they’re paid off
This is probably one of the first things you will be tempted to do right after getting your debt sorted out. Very predictable but very avoidable too. Forget freezing your credit card in a block of ice. We’ve all seen what Rebecca from Confessions of a Shopaholic did to hers. It’s a crazy mess and you don’t want to have to see yourself be in that same pathetic situation.
The most guaranteed way that you will never be in even more debt is to just close your credit card. Simple. Only spend what you have and save up for emergencies.
So there you have it folks. Just some of the common traps to avoid when getting a debt consolidation loan. Have any tips for your fellow debtors? Let us know in the comments!