Debt Consolidation – 5 Fatal Mistakes To Avoid

February 15, 2012 by  Filed under: Debt 

Debt consolidation can be a wonderful gift for a debtor who is in trouble. It is an account restructuring that allows the individual to merge credit products while possibly benefiting from lower interest rates. When a debtor uses it correctly, a consolidation can save that person from ending up in bankruptcy court. However, debtors must use the opportunity to improve their situations. They must use strategy and logical thinking while they are working to rebuild their credit. They must try hard to avoid the five common mistakes that people make with debt consolidation.

1. One of the worst and most common debt consolidation mistakes is failure to dissolve credit accounts. Most debtors who apply for consolidation loans do so because they have overextended themselves and opened too many accounts. Quite often, a debtor will receive a consolidation loan and fail to stop using his or her existing credit when such accounts become current. Debt elimination does not work if the individual utilizes the revolving credit again. Consumers who really want to get out of the vicious cycle of debt should cut up and close credit card accounts once they repay them with the proceeds from the loan. Failure to do so may result in an even worse credit situation than the original.

2. Another common mistake people make with debt consolidation is hasty agreement. Some consumers fail to read all the fine print involved with a particular company’s debt consolidation loan or service. Consolidation lenders can add many extra monthly fees that make a consumer have to struggle to pay off. Debtors should carefully examine all information before accepting any type of credit help service.

3. The third mistake debtors make with consolidation is failure to conduct research. Many companies promise to lend money and help debtors with services, but not all of them are trustworthy. The best thing for a consumer to do before consolidating debt is check user reviews and comments. In addition, he or she can check with the Office of Fair Trading for specifics on the company.

4. Some debtors have bad repayment strategies even when they receive a consolidation loan. The best thing for a consumer to do with a loan of this type is to pay more than the minimum balance each time. The faster a person puts toward this loan, the faster he or she can reach financial freedom.

5. Finally, debtors make the mistake of not restructuring their spending habits. A debt consolidation is only part of the process of getting one’s life back on track. Debtors must also learn the skills necessary to use financial discipline. A consolidation can be a very good thing. However, poor management can make it seem like more of a nightmare. Debtors should receive advice and counsel in addition to a loan.

If you wish to avoid making these mistakes and instead making debt consolidation work for you, then contact the UK debt consolidation specialists, Abbot and Edwards on 0800 533 5444 or visit the website.

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