Last Updated on Dec 20, 2019 by James W
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If a person has multiple loans outstanding and they are finding it difficult to make all the monthly repayments, it is often a wise move to take out a debt consolidation loan.
The loan would be used to pay off all outstanding debts, leaving the person with just one monthly repayment, thus eliminating the stress that comes with trying to make multiple repayments at different times of the month.
However, there are many things to consider when taking out such a loan, and with that in mind, here are some common mistakes to avoid when applying for a debt consolidation loan.
- Keeping Open Existing Lines of Credit – If you keep your lines of credit open, there is a real risk of falling back into the same trap that put you in this situation. Those looking for debt consolidation with bad credit contact Debt Fix, Australia’s leading online finance provider and a company that has helped thousands of Australian people to eliminate personal debt. It is wise, at least for now, to stop using credit cards, as they can easily cause you further problems in the future. You know yourself better than anyone, and if you feel that having the credit cards is too much of a temptation, simply cut them in half.
- Failing to Understand How You Got Into Debt – Unless a person fully realises how they managed to end up in a situation where they are in debt, there is a risk of the same thing happening again. Debt consolidation is not a quick fix that means you can carry on as you were, and certain changes need to be made to ensure it doesn’t happen again. There are free monthly budgeting worksheets you can download online to help with managing your finances.
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- Not Knowing The Full Cost Of Debt Consolidation – One should always make sure to fully be aware of the cost of debt consolidation, which is something the loan provider should make clear. It might be that you are paying more in the long run, yet if the consolidation clears all outstanding debts, it is probably worth the extra interest, as unpaid debts continue to accrue interest.
- Not Creating A Repayment Plan – Once you have the debt consolidation loan and you have paid off all outstanding debts, you need to calculate how you will manage to make the single monthly repayment. It is a good idea to list all of your current outgoings, which will help you to see ways to reduce expenditure, and with some personal sacrifice, the debt consolidation loan can be quickly paid off and you will finally be debt-free.
If you approach a reputable finance company, they will make sure that you fully understand what debt consolidation involves, and should they feel that debt consolidation is not the best solution, they would recommend another course of action.