The Cons of Debt Consolidation
If you have a poor payment history with your credit cards, consolidation may not be the best option for you.
- Using a home equity loan – When you take out a home equity loan, you’re putting your home on the line for your credit card debt. If you’ve had trouble paying your bills in the past, this is not a good option for you.
- Using a third party consolidation firm – You have to be careful when talking to firms over the phone. Many of these companies charge outrageous fees to help you with your debt and the payments can be enormous. Use a debt consolidation calculator first to determine the overall cost when choosing this option.
- Using a personal loan – If you can’t pay the money back, your credit or your relationships with friends and family who gave you the money will be ruined. Even asking for the money from someone you know can be embarrassing. Use this as a last resort, if at all.
Being able to pay your bills on time is an essential factor in all three options. If you weren’t able to pay your credit card bills on time because of lack of financial planning, consolidation may not be for you.