Three Debt Consolidation Mistakes That Will Cost You in the Long Runby Tim Saighani Finance Manager
Debt consolidation is a tool that can help you get out of debt, and a reputable debt relief company can help you achieve this. Nonetheless, it’s not a get-out-jail-free card. There are ways to manage a debt consolidation plan responsibly and effectively, but there are also ways to fail at a plan, spending more money than you intended and entrenching yourself more deeply into debt.
As such, before rushing into a debt consolidation plan, consider these three fatal mistakes that many consumers make that will cost you more in the long term.
Reloading your cards
Debt consolidation is a financial restructuring approach that can help you clear your debt, but it doesn’t let you completely off the hook. Once your previously maxed-out credit cards once again become available for use, it may become tempting to immediately run up another balance. But this will simply land you in the same position that required debt relief counseling in the first place.
If you pursue a debt consolidation plan, find an accountability partner who can encourage you not to immediately reload your credit cards.
It’s equally important to shift the way you think about your cards, for instance, consider them as a tool to be used for emergencies only rather than a vehicle for random, discretionary spending on non-essential items.
Overpaying for your debt relief program
Some debt relief companies charge high fees to initiate a debt relief program. You should never overpay for debt relief assistance. It’s vital to thoroughly research your options and to find a debt relief partner who will prioritize helping you become debt-free as soon as possible. Paying steep upfront fees will defeat this purpose.
Failing to stick to your program
If you enter a debt consolidation program, it’s critical to stick to it and hold yourself accountable. Don’t start to skip payments, or you will overextend your repayment schedule. Missing multiple payments will also severely damage your credit score, causing creditors and lenders to look upon you unfavorably. This can make it challenging to get credit in the future. To avoid falling into this trap, make sure you plan your budget to ensure you can cover all of your required payments and make them on time. You will also have to adjust your lifestyle and make changes like reducing or eliminating discretionary spending while you are in the repayment process. Although this may seem challenging, it will pay dividends in the long term, positioning you to continue building wealth once you’ve paid off your debts.
Although debt consolidation is a healthy strategy for many consumers, you can easily fall into a trap of worsening your financial situation if you aren’t careful. It’s important to know your options, your limits and the risks involved in the process. Contact a reputable debt relief company if you need counsel or advice.
Created on Nov 8th 2019 02:16. Viewed 369 times.