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Consolidating your debt might be the right decision. However, make sure you know what the risks are. It’s not the right strategy for everyone, so knowing the cons along with the benefits will help you arrive at the best choice for you. Here are some of the possible drawbacks you might encounter.
The Debt is Still There
When you choose debt consolidation in Austin, Texas, it doesn’t automatically cancel your debt. It just makes the debt easier to manage. However, you still have debts to pay off. The only difference is that, if you consolidate your debt, you could end up with lower interest rates or a lower monthly payment. In either case, paying off your debt is now easier as long as you don’t keep making charges.
There May Be Upfront Costs
When you go for debt consolidation in Plano, Texas, you might need to pay several fees. Some loans come with annual fees, closing costs, balance transfer fees, and loan origination fees. That means you need to have more in your funds to cover all those charges. If that isn’t a problem, or the benefits outweigh the inconvenience of paying upfront costs, good. It’s the right strategy for you.
You May Get a Higher Rate
People with high credit scores tend to get a lower interest rate. That’s because creditors don’t view them as high-risk customers. However, if you have a low credit score, you may get a higher interest rate or be denied a loan. In that case, consolidating the debt might not be worth it. That’s because a lower interest rate allows you to save on interest payments. If you get a higher interest rate instead, that’s not ideal. You might need to explore other options.
Missing Payments is Bad
Debt consolidation is an excellent strategy if you’re committed and have no plans to miss any payments. Otherwise, your credit score will be affected negatively if paid over 30 days late.
Debt Relief and Credit Counseling
If your credit score isn’t imperative in the short term or long term, then a credit counseling or debt settlement program could save you more money than a debt consolidation loan. Credit counseling programs consolidate your debt without a new loan by lowering the interest rates on your existing cards and paying the creditors for you form one monthly payment. A debt settlement program negotiates your balances for the highest savings possible without bankruptcy. Be sure to research the Better Business Bureau before choosing a company. Make sure they are licensed in Texas and have Texas offices if that is important to you.