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4 Debt Consolidation Beginner Mistakes

8 August 2018 No Comment

Everyone, in the end, decides that consolidating their debts is the only option after the persistent hostile collection calls and a mounting stack of credit card statements.

So, debt consolidation feels like a huge relief since you stop trying to stay on the top of several creditors, thus you aren’t skipping the deadlines and risking to steep interest rates compounding.

However, debt consolidation is the first step in getting your assets under control and getting out your debt. You have other major steps to make so you become debt-free. You need to be careful so you don’t end up in a worse financial situation.

Here are 4 debt consolidation mistakes you need to avoid.


Mistake 1: Not controlling using the credit

If you don’t do the debt consolidation right, it can become a big issue. When you pile all your debts in one card or another loan, thousands of dollars are free up in your wallet.

Closing all cards simultaneously can take a fee on the credit score and this is better than do an excessive spending. The credit will recover as you pay the debt, and you always have the option to open a new card in the future once your financial situation is stabilized.


Mistake 2: Not considering all the options

You can sign up for an unsecured or secured loan with a bank, open a line of credit to a house or move all card debts to one credit card in balance transfer. These are your options and you must choose carefully which option suits your needs the best.

However, due to the enormous use of debt nowadays, more options functioning as debt consolidation have opened up too. Nowadays you have hundreds of options when it come to debt consolidation, and you can compare them with a tool like CompareMyRates. You can choose a debt relief option that consolidates the unsecured debt in an affordable once-a-month payment. Another option available for you is the Debt Management Program, a confidential and private alternative for people struggling with debts. Consumer Proposal is a legal process that reduces and consolidates your debt. It is a form of insolvency so consider it only as your last resort.


Mistake 3: Not making a plan to reimburse the debt consolidation on time

You can pay the consolidated loan for years if you’re paying a minimum once a month. Therefore, it can be a difficult process to become debt-free. Also, if you’re including more debts, you will worsen the process.

Sometimes there are definite deadlines. The credit counsellors make the debt repayment plans and usually, the creditors and consumers agree to repay the debt within two to five years.


Mistake 4: Not completely comprehending how you caused your current situation

Debt consolidation is maybe the perfect option to organize your finances and reflect. It allows you to deal with monthly payments and track your spending. Think carefully about how you ended up with such a debt. If you don’t change the habits that got you into your current position, it may repeat.

You must do several is to get you out of it. For starters, you must be aware of your triggers and vulnerabilities. Search through your bills, credit card statements, and receipts to have a better look at your spending so you can understand what the reasons were for your debts. When you have all the necessary information, make a budget, and stay well organized to avoid getting into the bad financial situation.

If this process overwhelms you, a credit counsellor can direct you through it.

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