Financial relief from debt consolidation seems to be the rage of today’s consumer. It all sounds so convenient and tidy, and for some people, it just might be.
However, for at least half the population, looking at debt consolidation might not be for you. Some people don’t need it. Some people aren’t ready for it. Some people are grasping at straws, and hence aren’t taking the time to do the research to find out what might be the best way for them to go.
The fact is that, for those people who need debt consolidation, it can be a boon if you choose the proper way to go. If you have multiple credit cards with high interest every month and you can not only pay off all those balances at once, but also have a much lower interest rate, which puts more money in your pocket, that can be a good thing.
But it’s not all that simple. There are responsibilities that come even with doing something like that. Let’s take a look at reasons why someone might not need, or shouldn’t even think about, debt consolidation:
1. You make enough money to pay all of your bills. Many people get nervous when it feels like they can’t pay their bills. However, all most people really need to learn is how to budget their money. If you’re someone whose first thought when you get paid is how to spend it, then it’s possible you have the resources to pay your bills, just not the discipline to restrain yourself. What you need to do first is do a quick list of how much your net pay is times two, estimating your monthly income, then a total of all your bills and their monthly payments. If you have at least $300 a month more in income than your monthly bills, if you can learn how to budget you might be fine.
2. You make enough money, but you have no discipline. So you’ve determined you make enough money, but your interest payments are high and you’d like to consolidate your bills. The problem is that if you’re a spendthrift, consolidating your bills is only going to get you in more trouble.
When one consolidates their bills, they have to be ready to stop exhibiting some of the bad habits they already have. One quick way to do that is to stop using all except maybe one of your credit cards. It does you no good to consolidate your bills, then build more debt on top of that. If you don’t believe you can maintain discipline, don’t even think about debt consolidation.
3. Are you good at researching what you’re looking to get into? If you’re someone who’s sitting at home worried about paying your bills, and the first people you’re ready to call are the ones who are advertising their services on TV, and you’re ready to sign up with them without researching what they’re all about, you’re not ready for debt consolidation. Just knowing that the recommendation of some of these companies is for you to stop paying your bills should be reason enough to want to learn more about some of these companies.
4. If you’re making less than the amount your bills come to, debt consolidation isn’t for you. There’s probably no way that you’ll be able to obtain a loan anyway, unless you put something up for collateral, and it’s possible that the amount that you get to put back into your pocket isn’t enough for you to live on without worrying about defaulting on your loan. And the last people you want to ever default on are people from whom you’ve gotten a debt consolidation loan from, especially if they’ve tied it into your mortgage.
These are some things to consider before you decide to go forward with debt consolidation. Every person must be honest with themselves if they don’t want to possibly hurt themselves even more in the future.