Debt Consolidation in San Marcos, Texas: 6 Mistakes to Avoid

A consolidation loan can help you get out of debt faster than making minimum payments. But make sure it’s the best approach to take. You could end up digging a deeper hole if you’re not careful. Don’t let that happen. Here’s a list of common mistakes people make before consolidating their debts. Do your best to avoid them.

Not Talking to a Credit Counselor or Debt Specialist

You understand your options. You’ve read about it. But that doesn’t mean you should skip a visit to a credit counseling service. It wouldn’t hurt to discuss your options at length with a credit counselor. That discussion can help you understand debt consolidation in San Marcos, Texas, in greater detail.

Not Understanding What Will Happen

Some people make the mistake of thinking that consolidating their debts resolves their financial problems. It doesn’t. You’re still in debt. You only found a way to streamline the payment for your financial obligations. You may enjoy a lower interest rate and lower payment, but your principal balance is the same after the transfer.

Not Paying the Debts Fast Enough

Once you receive the proceeds from the loan, pay off the debts and do not use the credit cards for any further purchases. Otherwise, you will have to pay back the credit card balances plus the debt consolidation loan. Use the monthly debt consolidation loan savings to make new purchases with cash instead of credit.

Shopping with the Loan Proceeds

It can be tempting to shop once you get the loan proceeds, thinking that you can just put back the money once you get your pay. But that’s an inefficient way to deal with your debt problems. If you’re already in debt, it’s wise to stay away from shopping. Once you receive the loan proceeds, start paying off your debts.

Not Fixing Your Spending Habits

Combining multiple debts into one loan isn’t the right strategy for every situation. It may work this time. But what about the next time you find yourself dealing with debts? Don’t wait until you acquire crippling debt before you fix your spending practices and habits. Try budget management plans. Look for approaches that work. Determine the triggers that drive you to shop and spend money recklessly. If you use retail therapy to help you feel better when you’re sad or stressed, put a stop to that. Learn other ways to cope emotionally without putting your wallet on the line.

Ignoring Your Credit Score Rating

Thinking that your credit score won’t impact your loan application is a huge mistake. The point of consolidating your debts is to get a lower interest rate. A bad credit score, though, will get you a high-interest rate.

Alternatives

If you cannot qualify for a debt consolidation loan, bankruptcy is not the only option. Debt negotiation programs are designed to negotiate your balances down to as little as possible and provide a monthly program payment that could be much less than minimum payments. A credit counseling program will pay back your debt in full but usually offers a reduced interest rate with credit card debt. These hardship programs can save you much more money compared to making minimum payments, but they may negatively impact your credit score unless you are already delinquent with your debt. So if you qualify for a debt consolidation loan and can easily afford the payments, that should be your first choice.