Are You Caught Up In These 3 Costly Debt Consolidation Traps?

If you?re drowning in debt and considering debt consolidation,? you might want to pump your brakes until you get the full picture.

First, we all know the benefits of debit consolidation:

• Consolidate scattered debt into 1 monthly payment
• Payment is often lower than paying several accounts at once
• Lower interest rate
• Allows borrower to focus on one debt and avoid late fees

But ? what are the traps?? Something so good can turn into a nightmare for many borrowers with good intentions of getting and staying out of debt.? I?ve been there before.? I?ve taken out a debt consolidation loan with the intention of getting a lower payment with the added benefit of paying just 1 company instead of several.

Well that backfired.? Without really understanding the traps of debt consolidation I saw my debt creep back up because I didn?t really understand that I needed to change my approach and attitude towards debt reduction.

Today, you learn from my mistakes.? Are you getting caught up in these debt consolidation traps?? Check them out below:

Piling on more debt

This is a common fear of lenders who are reviewing your application.? They question the purpose of the loan and whether you will consolidate the debt only to get back into more debt down the line.? This is what we cann ?double trouble debt?.? You?re now paying off the debt you just consolidated but now you?re racking up more debt on top of that putting you back to square one.

While debt consolidation can be a god send because you get the lower payment made to one creditor, if you aren?t careful, you can end up back where you were when you started the debt reduction journey.

No clear plan to stay out of debt

I can?t stress this enough!? You need a solid plan that you can stick to in order to get out of debt.? Without a plan to guide your decisions and monthly financial events then you can?t get to the finish line which means you are debt free.? Chart a plan to get out of debt and you will find that your decisions are easier to make since they are part of the plan to get you debt free.

Paying only the minimum

This goes for any debt.? But even though you have a lower payment for your new debt consolidation loan, you should pay at least 10-15% more to chomp at the principal.? You get out of debt faster and then you can move on to saving more for your other savings goals.

No solution for the core issue

Your spending habits.? You have to come clean with yourself about how and why you got to this point.? Then and only then can you begin with a plan to take control and dominate your finances.

Don?t get me wrong, I am a huge fan of debt consolidation.? But it has to be done with a clear plan in mind to get to the finish line debt free.

Source: http://www.girlsjustwannahavefunds.com/pros-and-cons-of-debt-consolidation/

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