It is easy to see how debt consolidation can help people improve their financial situation. However, there are situations when the borrower ends up in the same situation of owing more than they can afford to pay every month. In order to avoid this situation, there are certain things you should and should not do. Here are the most important of them:
1. Do calculate all your debts carefully, to know exactly how much you owe and to whom and assess your budget thoroughly, to know exactly how much you can afford to pay each month;
2. Do research the market attentively, to find the most reliable lenders and the best debt consolidation loans;
3. Do evaluate your borrower’s profile and assess your strengths and weaknesses, to know exactly how to turn things in your favor when negotiating with your lender;
4. Do consider the unpredictable, as, should something bad happen, you want to make sure that you will be able to keep up with your debts;
5. Do take into account the impact the consolidation will have on your credit score, as you want to avoid lowering it too much.
6. Do consider bringing in a co-signer, as this could get you a lower interest and save you money in the long run.
1. Do not borrow more money than you really need, as you do not want unnecessary debts;
2. Do not go for the maximum repayment period, as you may need a new loan later on;
3. Do not use your home or other valuable assets as collateral for the debt consolidation loan if you have a choice, as failing to repay your debts would mean losing them;
4. Do not ask your close ones to co-sign the loan for you if you are not sure that you can repay it, as you could lose their friendship and support forever;
5. Do not sign a loan agreement if you are not completely sure that the lender will live up to their end of the deal and that the loan terms are in your favor;
6. Do not continue spending the way you used to, as your spending habits were the ones that got you in trouble in the first place.
Otherwise put, you should start behaving responsibly, not only as far as the debt consolidation loan is concerned, but also when it comes to planning your budget and managing your expenses.