subject: Debt Consolidation – It's Not Always the Best Answer [print this page] Debt Consolidation It's Not Always the Best Answer
Debt consolidation is a common tactic for people with mounting debt. For some, it's a way to consolidate payments, reduce interest, and streamline their budget. It might sound like a great idea when you feel like your bills are starting to spiral out of control.
Some people find that their debt is mounting and they've got several payments to make throughout the month. When those individuals look at the interest rate for each payment it can quickly become apparent that they're beginning to have a heavy debt load.
Is Debt Consolidation the Answer?
If you are two payments or more in arrears, you probably won't qualify for a debt consolidation. Your credit needs to be in generally good order, otherwise you'll appear to be a risk to lenders.
And, if you move to this form of debt, you could suddenly require collateral. This could put your property at risk of being repossessed if you miss payments. Those who have unsecured credit cards and small loans could suddenly have their home and / or vehicle on the line. Is this a risk you're really willing to take?
Consolidation Could Lead to Increased Debt
One of the common pitfalls of consolidation happens when you don't take this as an opportunity to get out of debt. Many consumers feel the relief by paying off their debts but then run credit card balances right back up. Now, you've got a consolidation loan AND more debts on top of that.
Consolidating debts isn't the answer for everyone. But it could be worth at least investigating as an option. You may want to sit down with a debt counsellor or credit counsellor to talk about your various options.
Making an informed decision about your debt load is wise. By looking at your options and your specific situation you can make an action plan for getting out of debt as well as putting money away for the future.
Only you can improve your financial situation. Through careful budgeting, through paying off your debts, and through making wise financial decisions, you can take the pressure off. Debts can be dangerous to your health, your wealth, and your relationships. A careful look at your spending habits, your debts, and your financial decisions could serve you well. Before you decide to try to get approved for a debt consolidation, consider talking to a financial expert.
