Using debt consolidation to save money can be a smart decision for someone to take, but avoid these 4 dumb debt consolidation mistakes.
- You can get a no-interest balance transfer card to consolidate your debt, and eliminate your 19% interest rates. However, if you have only 18-months to pay off the balance before the rate goes back up from 0% to 25%, make sure you pay off the balance in that 18-month period! If not, your debt just became more expensive than it was and you’ve also had to pay an additional 5% for the up-front fee! Most balance transfer cards offer you 12-months to pay off the balance in full before the rate goes up, but you can negotiate with the credit card company to give you 18 months and they will do it. If not, let them know you will be using Discover or any other creditor who is offering you 18-months, even if no other creditor really is. Or even better, explore debt relief programs before using debt consolidation, where your debt can get reduced! Compare debt relief programs versus debt consolidation side by side (including benefits and downsides to each plan by CLICKING HERE)
- Using a low-interest home equity line of credit to consolidate your high-interest credit card debt, can save you big money, BUT NOT IF YOU MAKE THIS NEXT DUMB MISTAKE! Often a home equity line of credit carries only a 4%-5% interest rate, versus your current average interest rate of 25% between all of your existing credit cards. So by transferring all of this high-interest credit card debt onto a low-interest home equity line of credit, which will also lower your monthly payment, wow that’s a smart move! However, if you fail to make your monthly payments on the home equity line of credit ON TIME EVERY MONTH, now you’ve just put your property at risk. See, by transferring credit card debt to a home equity line of credit, essentially what you are doing is switching your unsecured debt to a secured loan. Secured loans carry much more risk. Go ahead and use the home equity loan to save money and eliminate your high-interest credit cards, but don’t make the dumb mistake of now falling behind on your payments because you could end up putting your family on the streets and sleeping outside!
- Don’t forget to read the fine print. Ok, so you