You might be having some small debts of loans, which you want to pay as soon as possible to get rid of monthly instalments and interest rates, what would you do? You might think of an option of Debt consolidation. But do you think debt consolidation is for everyone? Do you think this debt and loan consolidation will help you recover from the burden of loans? Do you think you will be able to pay back all the loan you get for the debt consolidation? Do the terms and conditions of the loan consolidation are in your favour?
These are all the questions, which you should ask to yourself before getting debt consolidation. There are many times when you might be at the wrong track. And most times it is because you opt for loan consolidation and debt consolidation to lighten the burden. Instead, you fall in a dark hole, from which it is difficult to recover.
Here are some points which will make you reconsider, why debt consolidation is not for you.
Credit Score
Credit score matters a lot. You need to look for the good credit score. If your credit score is less then or near 620, debt consolidation is not for you. If you have a low credit score, most lenders will not offer you loan consolidation. This means you will be eventually left with little or no loan consolidation options. Just in case you find a company that agrees to provide you with loan consolidation, there are two possibilities.
One is that, if you find a lender, the company will be offering you high-interest rates, and not very flexible terms and conditions. This will get you into bigger trouble. The other possibility is that, even if the lender agrees to provide you with a loan on your terms and the required interest rate, there is a higher chance of the company being a fraud.
This way, the worry of clearing the debts will maximize, and you will have bigger trouble to handle. In such a case, it is better to drop the idea of Loan consolidation.
Total Of The Debts
You already know why you need to have loan consolidation. And the purpose of it. Debts and loan consolidation will clear up your small loans in on the go and will provide your better and easier terms. If the sum of your smaller debt’s instalment is greater than the amount you earn, you might end up in trouble. If the installment you pay takes up to or more than half of your income than talking debt consolidation will make the situation even worse. You need to use the logic, and if the instalment takes up to half of your salary, the loan consolidation will take a larger amount of it. And in that case, how would you fulfil your daily needs, and you will eventually have to take more loans to deal with the expenses. Getting under the burden of more debts if a worse type of situation to be in.
Bankruptcy
If you are facing the condition of bankruptcy or the loans you owe have been overspent, and because of that, the company has sued you, this is another alarm. In such condition, you first need legal advice. Even if you do not file a case, you need a bankruptcy contract. If you are still thinking of Loan consolidation, and you think this is the only option, you need to get a few things straight.
First, you need to think, what are the expenses that are making you overspend. You also need a budget and reschedule and plan the ways of income and the expenses — one more thing you need to understand that you can not be under the burden of more loans.
So, all you need to is to budget, reschedule and plan how to earn. This way, debt consolidation might be an option left, otherwise it a big alarm. And if you don’t plan and budget the earnings, you will surely get into the burden of bigger loans.
These were a few situations in which debt consolidation is not the right thing for you.
How Would You Know That Debt Consolidation Is The Right Thing For You?
We have already discussed in what situations, and loan consolidation is not the best option. Now, we are discussing, when is loan consolidation the best thing to do. Here are a few points that will help you have a wider picture and clear thought about loan consolidation.
Interest Rates
Every loan comes with an interest rate. Some have a much higher rate while the others charge less. So, if the smaller loans you have, charge a higher interest rate that the loan consolidation, in this situation, you should definitely go for loan consolidation. It will lighten the burden of loans, and all your smaller loans will be cleared in one go.
Credit Score
Credit score matters a lot. If you have many smaller loans, and you have a good credit score, you have many lenders who will offer you loan consolidation. This way, you can pick the company with better terms and interest rates.
Profit from the Business
If you own a business, and it is currently getting better and providing more profit, it is a better option to opt for loan consolidation. With the profitability increasing, you can acquire a lower interest rate in loan consolidation.
Track Record
If you have been in the business for a long time, and your business has seen ups and downs, you might acquire a better deal for loan consolidation. Track record matters, it tells the credibility of the business and the owner.
The bottom line is, loan consolidation is not the solution every time, you need to have the facts and figures clear. You also need to have the correct research with the statistical evidence. If you think opting for the loan consolidation option is the solution every time, you might not be right. But in ideal situations, loan consolidations can actually help you lighten the burden of debts.
