The idea of consolidation is to restructure
your debt payments. Sometimes, the individuals do have sufficient finances to
afford the debts, but due to the busy schedule, they are unable to maintain the
payments properly. Here are some traps that you need to avoid and do a proper
research.
You
Assume That The Root Cause Of Problem Solved:
The
consolidation is a type of treatment, but it cannot solve the real financial
sickness that you are suffering from. You are required to find out the actual
cause of falling into the debt situations. The reasons can be anything like:
- You have not saved
any money for emergency purposes. Even if you are responsibly using your credit
card, a simple car accident can cost you a lot. If you require a huge repairing
cost for your car, where can you get the money?
- You may possess a
large number of credit cards and are using them recklessly. The high interest
rates on those credit cards are enhancing the debt balance.
- With a boasting
attitude of the financial success, you are trying to spend just like the
persons around you. Sometimes, your finances may not cope with this attitude!!
Consolidate
Wrong Debts:
The interest rates should be taken care
of while doing the debt consolidation. When you
find that the loans with low interest rates are becoming higher after
consolidation, never consolidate them. For example, the student loans generally
possess low rate of interest. You can consolidate the debt, with the balance
transfer card. The transfer may start with a very low rate and even a 0% rate
of interest. But, if you are not able to pay the equivalent amount of the loan,
within the stipulated time and the low rate expires, you may end up paying a
much higher rate than the original rate of interest. So, you must do a proper
calculation before selecting your debts for consolidation.
Absence
Of Realistic Plan For Repayment:
These debt relief
programs are only helpful in restructuring your balances. A separate repayment
plan should be ready in advance. Most of the consolidation plan is combined
with the terms of the repayment. You can also choose higher payments for
completing your loans, as early as possible. As there are no penalties for
prepayment, you can surely pay in advance. When you are consolidating, a
particular debt management plan will be forwarded to the lenders and the
creditors for the purpose of approval. It can be difficult to change, as soon
as the plan starts. So, ensure your present capabilities of repayment before
setting up the particular repayment plan.
Make sure you are not being guided by a wrong
professional. Check the credibility of the debt consolidation firms through the
websites and go through their ratings and reviews before choosing. Never keep
your house in a dangerous position through the home equity loan for the
repayment. All these traps are required to be taken special care when you are
looking for a consolidation of your debts.
Author
Bio: David Steven
is a debt consultant who provides tips for debt consolidation. In this article,
he is talking about some dangerous traps that require to be taken care of
during the debt consolidation.
Image source: http://www.jphotostyle.com/clipboard/debt-consolidation.html
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