Many people have different views when it comes to consolidating their debts. I believe that when you consolidate your debt, it is best to take a step back and consider your current financial situations. Are your credits in good standing? what’s the current interest rate that you’re looking for? are you in desperate need to consolidate? One important thing that many people fail to remember is that consolidating your debt is not actually getting you out of debt, it is just putting all of your debt into one loan. Now that you only have one loan, you’re thinking you don’t have to worry so much right? think again. Most who have this mindset ends up consolidating their loans and as a result, going back to their spending habits and maxing out on their credit cards again. This will create into a snowball effect where you think you got your financial situation under control but in fact, you’re digging the hole bigger and bigger.
Benefits of it…
If you are the other percentage of people who realize the responsibilities that comes with consolidating your debt through a bank loan, there are a few benefits that can result from consolidating. One of the obvious benefit is the convenience of paying just one monthly payment each month without having to worry about logging into different accounts and pay. You will end up saving so much more money in interest over the long run if you can lock in on a lower interest rate.
There is but one word that most people fear and that is bankruptcy, it can cripple you. If you let your debts go out of control and not consolidate in time, you will have no choice but to file for bankruptcy. Once you go into bankruptcy, it can stay on your record for at least 10 years, it will be very hard to ask for loans and apply for mortgages. Your bad credit will even affect your car insurance no matter how good of a driver you are or how many accidents you had.
Your very own lifestyle must change if you choose to consolidate in order to prevent you from going back to the old habits. For example, see those credit cards in your wallet? cut them all up! If you have to keep one for emergencies then by all means keep it, but freeze it in your freezer down in the basement, this will help you from misusing it. The fact that you decide to consolidate your debt is the first step to recovery so remember to control your impulse and not make it worse but most importantly, never let money be your master.
What are your thoughts on consolidating? Is it a good or bad thing?
–Featured in The Carnival of financial Camaraderie #3