• Are you at risk of getting into debt again? Before you consolidate household debts, decide not to get in the same situation again and stick to your decision. While consolidating debt can be a great way to get out of trouble it is still a big financial commitment and should be respected.
• Along the same lines, a poor credit rating can take years and years to recover from, so take your current situation as a good lesson learned and avoid having to resort to loan sharks next time round.
• Taking longer to pay off the loan isn’t always a good thing. It may mean you increase your total debt quite dramatically and cost you a small fortune in the long run. So weight up all the pros and cons first.
• If your consolidation loan is secured on your home, or on anything else you own, you risk losing it if you default on repayments.
• Some loan agreements insist that a responsible, financially secure person co-signs the paperwork, guaranteeing the loan. If you miss your repayments, they become legally liable for the money you owe. Not a good way to win friends and influence people, and worth avoiding!
Using secured and unsecured loans to consolidate debts, you’ll find that there are two types of debt, secured and unsecured. Secured lending uses your property as security, so it is only suitable for homeowners. If you default on your repayments you risk repossession. Unsecured lending isn’t secured on your home, so usually has higher interest rates.
Intelligent planning equals successful debt consolidation
• Don’t get into any more debt
• Plan your expenses
• Make common sense economies
• Create a sensible budget
• Stick with your budget, no matter what.
This might sound challenging. But if you’ve been struggling with debt and worrying for weeks, months or even years, getting things in shape will probably feel pretty good!
Get impartial advice about debt consolidation at Debt Watchdog: DebtWatchDog.com