Why Consolidation Loans Are Something You’ll Hate
MartinRaymondo
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MartinRaymondo 〰️ 〰️
Many financial services out there appear helpful. While some are legitimate, others are downright terrible.
The consolidation loan is a sheep in wolf’s clothing.
It’s like the fox guarding the hen house, and you’ll see why in a minute.
The Truth About CONsolidation Loans
A debt consolidation loan is something you take out to merge existing debt.
If you have three credit cards and an overdraft, you would combine those four debts. You can also add to the loan, which is a terrible idea.
The issue with consolidating is most people keep their behaviours the same.
They get back into debt, and now they also have to worry about the consolidation loan. That’s when you get in serious trouble.
Unfortunately, most people fall back into debt alongside their loans.
Interest Rates and Credit Score
People think their interest rate will be lower due to the consolidation process.
This is only sometimes the case, as interest can rise, and the bank often has the power to change that. If you read the fine print, it’s always there.
What if you miss a payment or two? They can hike the interest rate.
So, what about my credit score?
Won’t it be better if I’m not missing payments like before? Yes and no. Yes, it will help as you make on-time payments, and no, it won’t increase your score.
That’s because the credit system rewards people who repay many debts over time.
Refrain from assuming this loan to fix your credit, as consolidation has pros and cons.
What Should I Do?
What should you do if you have several debts hanging around that are stretching you too thin? This is my advice, the same one I followed to get out of debt.
Get current on all your debts.
Pay the minimum on all of them, and then attack the smallest owed debt.
Keep rolling that money over until they are all paid.
If you need to catch up on more than one debt, then it’s more complicated. I wouldn’t recommend consolidation, but close all your existing debts if you do.
If not, you might regret it.