Some mistakes are not only hard to manage but are also very costly. Take debt consolidation, for example. Knowing and avoiding these errors can spell the difference between enjoying a financial freedom and filing for bankruptcy.
1. Wrong Ideas about Debt Consolidation
It’s not only curiosity that killed the cat. There’s also the wrong assumption. For one, debt consolidation doesn’t free you from financial obligations. After all, it is also a form of debt. However, it can provide you an easy, simple, and flexible repayment option especially if you have a mountain of loans to settle.
It also doesn’t solve all your financial woes. Not all kinds of debts can and have to be consolidated. Getting one also doesn’t ensure you won’t have repayments to make in the future.
Debt consolidation is not just about balance transfers for credit cards. You can also obtain a loan against the equity of your house as well as have a personal loan, which doesn’t require any collateral.
2. Not Shopping for Options
Not doing your research and expanding your options can cost you money. You cannot take advantage of potential savings simply because you choose to stick with your first choice.
With so many lenders and debt consolidation programs out there, there’s no reason why you should not shop. In fact, consider at least 5 choices before you make a decision.
Here’s the question, though: what factors should you consider during the selection process?
• Interest Rates – One of the biggest reasons for debt consolidation is to maximize the new loan’s low interest rate, which means bigger savings for you.
• Payment Terms – Your savings from interest rates won’t matter much if you still have to pay your debt for many years.
• Total Costs – A lot of people think they will be paying for interest only when they apply for a loan. There are other fees and charges including finance and closing fees. These can be fixed or based on a certain percentage.
• Kind of Interest Rate – Interest rates fall into two categories: fixed or variable. It’s also possible for your rate to begin as fixed for a few years then change to variable until the end of the loan’s life. Knowing the type of interest rate is important especially if it’s variable. Fluctuations can mean significantly huge savings or spending on your interest rate.
3. Avoiding a Debt Consolidation Counselor
Many people believe nobody knows their financial challenges than them, so they don’t need a debt consolidation counselor. However, these professionals can be your lifesavers.
They can point you to the ideal debt consolidation program, depending on your objectives, need, and budget. They can even design one for you then use it as your basis when comparing your options. Some can also negotiate on your behalf so you can have a better payment term and lower interest rate. Most of all, they can teach you the discipline and commitment to correct your bad financial habits.
Get smart with debt consolidation. Make it work for you by avoiding these dangerous mistakes as much as you can. Learn more at loansconsolidation.co or you can also visit https://www.usa.gov/debt to know more how you can deal with debt.
When you are dealing with a good amount of debt, it is important that you don’t commit more mistakes. Learn more at loansconsolidation.co.