4 Reasons Debt Consolidation May Not Be The Best For You
Debt consolidation simply means getting your financier to buy all your small debts. Meaning you take a big loan to cover the small loans you might have. This provides room for you to get out of debt quicker as well as pay relatively less. Regardless of how good debt consolidation sounds, it is not the best debt management solution for everyone. This is because it is able to equally worsen debt. Some reasons why debt consolidation might not work for you include:
#1. You are a serial borrower
Serial borrowers are essentially people who can’t stop buying things with money they do not have. Debt consolidation is not the best for a serial borrower because although it means you can take back your credit card, you still have a huge debt you need to pay, and borrowing more upon that debt would simply dig you into a deeper hole.
#2. You are a compulsive Spender
Compulsive spenders are the close relatives of serial borrowers. However, unlike those who feel the need to borrow, these people feel the need to keep spending. They just can’t stop and are, therefore, usually in debt. Debt consolidation is not the best if you’re a compulsive spender because it means you still have access to your credit card and are able to keep spending and keep on using the money you don’t have.
#3. You can never pay debts
If you have always had problems paying debts of any kind, debt consolidation is not for you. This is because debt consolidation doesn’t get rid of all debts you might have, and you will still have to pay back the loan you have taken to get rid of your little debts. In addition, the new loan you have taken works almost same as the other loans you just got rid of. Therefore, you still have to have a payment plan and your credit score is still in a precarious position.
#4. You are bad at allocating funds
If you have never been able to make the right decisions concerning money, thereby neglecting financial obligations, debt consolidation is most likely not the best option for you. This is because after you consolidate your debts, you acquire a new financial obligation that you have to fulfill. Mismanaging the funds provided for fulfilling this obligation will not look good at all, on your financial report.
Conclusion
Creating a huge debt in an attempt to get rid of numerous small debts is not the best for everyone. Debt consolidation, depending on your personality and character has the ability to either loosen or tighten the noose around your neck.
