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Being Proactive Will Prevent Consolidating The Wrong Debts

5 min read
Being Proactive Will Prevent Consolidating The Wrong Debts

You must be knowledgeable as well as proactive to find the best consolidation plan to ensure you get the desired results when you want to get rid of your unmanageable debts. Most people do not have proper knowledge even of the simplest things and often end up on the wrong side of it having to give up their personal fiancé management journey midway.

  • It is found that most people do not have proper knowledge about minimum monthly payment and often treat it as their installment payment. As a result, a lot of people never find then out of debt.
  • Moreover, people even make things worse by continuing to use their credit cards or line of credit.

The best solution to this is to be proactive and knowledgeable when you search for the best debt relief plan from sources such as or any other.

You can do this by following these few simple steps:

  • Laying out all the outstanding debts
  • Shopping around for the best interest rates and
  • Even making a call to your creditors to try to negotiate for a lower rate.

More often than not you will find that there are far better options other than debt consolidation or settlement when you crunch in a few numbers.

You will be surprised to know that if you show interest even the most stringent of creditors may be willing to work with you to get you out from your debts. These creditors are extremely helpful towards their clients who are finding it difficult to continue making the monthly payments due to several different reasons but are trying their best not to give up or fall behind their repayment schedule. These situations may be a job loss, any health emergency or any other reasons.

Choosing the debts

Once you are sure about the type of debt consolidation to choose, you must now make sure that you do not consolidate the wrong ones so that you make the most out of this beneficial option.

It is for this reason you will need to know the implications before you consolidate the debts. You must make sure of a few specific aspects of it such as:

  • The rate of interest so that it does not creep up
  • The associated fees so that it does not prove to be a costly transfer in the and
  • Whether or not you are putting the assets you want to leverage on the line to get a lower interest rate.

When you consolidate your debts make sure that you do not commit the common mistake of consolidating all of your debts without considering the fact whether it carries a low or a high rate of interest and whether you can carry on paying a few debts on time and regularly.

  • Few people do not even consider the type of debts they consolidate and end up making the wrong choice. For example, a few specific types of student loans such as federal student loans can only be consolidated if the borrower is already in default.
  • For a few specific loans that you may have taken from private lenders may have different polices. If you are not knowledgeable and carefulyou may even roll in debts that carry low rate of interest into higher interest one sand in the end pay up more as interest.

Therefore, the convenience of a single, large, low-interest consolidated payment may not be suitable for all types of loans.

The psychological effect

Ideally, it is the psychological effects that play a significant role in selecting the debts you may want to consolidate or settle. The experts say that most people find it more convenient and manageable to make the monthly payments when they combine all of their debts. However, this approach or decision is more psychological than practical because if the interest rate is not favorable, it will not make much of a sense in combining these loans.

Therefore, you should follow the rule of thumb that says to consolidate only the high interest debts and leave out the low balance and low interest ones to make the best out of this approach. You can pay off the debts left out separately.

It is human psychology that a debt such as a student loan that carries 4% interest may seem to be more reasonable to consolidate and easy to repay when it is transferred to a credit card that temporarily offers a 0% interest rate. However, you will need to take a deeper look into it and it is only then you will find that there are lots of other implications in it that you need to consider and factor in such as:

  • The balance transfer fee that can be high
  • The often short promotional period and most essentially
  • The rate of interest which more often in doubledigitsthat will be charged once you fail to pay the debt back within the seemingly doable promotional period.

If you know the consequences that you will face if you default, you will make the right choice as you will then consider the resources and your ability to repay.

Choose the right professional

If you want to manage your finance and debt alone, you may often lose track, commit mistakes and make wrong financial decisions that will hamper the financial health in the end. You will be better off and always be on the right track during the process with their professional guidance and expertise.

There are a few things that you should know about the industry and the machinery involved before you start to research.

  • As it is the debt settlement industry is infamous for its shady practices and aggressive tactics and their primary intent to make maximum profit by taking advantage of the borrowers in distress.
  • Most of the firms may even withhold your payments from your creditors or suggest you to do so for months very cunningly so that they can force a deal. This approach may be effective at times but will surely hamper your credit score.

Therefore, you will first need to make sure that you choose the right professional for that matter.

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