subject: Debt Consolidation-How To Avoid Common Mistakes [print this page] Debt Consolidation-How To Avoid Common Mistakes
Are you planning to pay off your debts by debt consolidation? Please pay attention to these mistakes , that people will often make when they consolidate their debt .Here's a list of most common mistakes of debt consolidation.
1. Agreeing to a plan that you cannot realistically cope with. Your financial situation may be making you stressed but you should never agree to a payment you are uncomfortable with just for the sake of debt consolidation. Spend some time to look at various options before taking your final decision.
2. Taking out a high interest rate loan. This is not a good idea if the interest is higher than the one you are already paying. You will pay too much money in the long run. This is often the case with student loans, which have low interest. If you are planning to consolidate your debts, check to see if you have any loans or debt at a lower interest rate than the rate that the debt consolidation company is offering.
3. Mistaking low payments with low interest during the loan process. Even though the loan repayment amount may be lower than you were previously paying, your interest could still be very high. They may have extended your loan repayment time.
4. Obtaining debt help with high fees due up-front. All reputable debt consolidation companies will charge a fee but it should be a low up-front cost or not require one at all. High upfront cost should be avoided
5. Getting a personal loan with high interest. This is great if you have good credit but the rates can be high. Shop around before making a selection.
6. Paying close attention to fees for balance transfers. There may be monthly charges, annual fees or fees for transferring your balances. All these fees can make it more expensive than staying where you are.
7. Paying off cards but continuing to use them. This only makes it easy for you to charge your cards to the maximum again. If you plan to keep one of your credit cards, keep one with the lowest interest rates. It could be a costly mistake to hang on to the wrong credit card line when there is another that might suit you better.
8. Making late payments during low introductory periods. Making even one late payment during this time can make your rates increase.
9. Going with a company just for its label. Just because they say they are not for profit company does not make them more reputable or realistic than other companies. Shop around and determine the right consolidation company for you and your needs.
10.Failure to understand your debt. You can decide not to consolidate your low balances debts that you can pay within a short period. Try to consolidate the loans or credit lines that have the highest outstanding balances, as these will lower your interest payments. Get rid of high balances before attacking low balances.
Debt consolidation can be a powerful tool to manage your debts but avoid the above mistakes to get the best out of debt consolidation.
