Just when you think your debt issues couldn’t get any worse and you have just about had enough of the phone calls and unwanted letters, you then find out that your attempt to negotiate with your creditor has failed. Things couldn’t be looking bleaker but you know there is a way out – to consolidate your debt into one easy-to-manage loan. This is an attractive option for most people in debt however in reality, getting a consolidated loan from a company you can trust might be trickier than you think. When it comes down to creditors, many in the past have been well known for not being transparent with their communication. That is why you need to be extra careful when searching for the right loan.
There can be several benefits to consolidating your debts. For starters, it merges all of your payments into one so instead of having to keep track of several credit card payments, you can simply make one payment each time. That makes it easier to track any debt and make sure that you won’t be missing any deadlines. You will also discover that many consolidation sources offer affordable interest rates. But it’s important to remember that just because you have this loan it doesn’t mean you can start from the beginning again with no bad credit history against your name. If you are not aware of some of the pitfalls of taking out consolidation loans, it’s important to enlighten yourself as might make some of the common errors, you might be in for more than you bargained for.
When you want to consolidate debt, it’s good to realise that this will take some real lifestyle changes. It does not mean superficially changing your spending habits but instead going to the root of the issue and seeing how you can avoid making the same mistake twice. This may mean you will need to downsize on some things to make your bills on personal loans more manageable so re-evaluating certain possessions is a good place to start.
But before you do, have a read through on some debt consolidation errors you need to avoid:
- Borrow more cash than you need. No matter how tempting it sounds, don’t opt for the higher loan amount and start thinking about all of the other luxuries and things you could do with the extra money. Being stringent is key at this stage and ensuring you opt for a loan that is well within the required amount to pay off your debts is essential to keeping your payments as low as possible.
- Choosing longer deals. It’s important to remember that just because the repayment term is longer it doesn’t necessarily work out to be the best deal. Normally when you want to consolidate debt, you will be charged a higher interest rate with longer repayments so you may as well get it over and done with and save yourself some money!
- Forgetting to do your research! Once you get into the red zone, debt companies will be after you left, right, and centre. You will get emails, letters, and phone calls – so brace yourself. You must be wary at this stage and never, ever, choose the first one you see. It is good to do some background checks before opting for a loan and checking with the Better Business Bureau. You can practically type in any company name and all of the bad and good reviews will come up these days. Especially on social media. Doing your own research will have a great impact on the results you get so ensure you choose one with a high ratio of positive feedback.
- One of the most commonly made mistakes is forgetting to shut down old credit cards. As much as you hate the idea of it, especially as you have come to rely on these plastic cards so much in the past, you will need to close your credit card accounts down. If you do not, things will keep cropping up and your debt will start rising again which means you have an even larger loan to pay off! This is not the quickest and easiest way to consolidate debt. So before your repayment amount gets too large, keep a close eye on which ones are still active and get in touch with your creditors to ensure they are closed down as soon as possible.