What Can Go Wrong With Applying for a Debt Consolidation Loan?
Your paycheck is barely enough to cover your bills, and as the summer heat turns up, it is only going to get worse. The energy bill is only going to get more expensive as you run the air conditioning almost constantly, and that is a bill that you cannot afford to pay late, since the future of LIHEAP, the federal program that protects residents from air conditioning shutoffs during extreme temperatures when they cannot pay their bills, is in jeopardy, and Florida does not have state level protections to replace it. When your budget is already stretched thin, a slight increase in your energy bill is enough to make you unable to keep up with your other bills. If you are barely making minimum payments on your credit card and car loans, the extra money you spend on air conditioning could push your budget into the red. If only you could make your minimum payments lower. You know you are in bad financial shape when it is not even Memorial Day and you are already daydreaming about borrowing money to get through the summer. A debt consolidation loan could be just what you need, but only if the stars align. For help finding short-term and long-term solutions to your debt problems, contact a Miami debt lawyer.
Spending Your Debt Consolidation Loan on Unauthorized Purchases
A debt consolidation loan is an unsecured personal loan with a low interest rate. When you receive the funds, you should quickly use them for their intended purpose, which is paying off or paying down your debts with higher interest rates, such as car loans and credit card debt. This way, you have a lower monthly payment, and by the time you have finished paying it off, you have paid less interest than you would have if you had not consolidated your debt.
When you are financially stressed, though, it is tempting to let your scarcity mindset win and to simply rack up more debt by spending some or all of the funds on purchases you have been delaying, instead of simply using it to pay down debts. If you do that, you are in a downward spiral toward bankruptcy.
When Your Debt Consolidation Loan Gets Rejected
Debt consolidation loans are a great relief when you can get them, but think for a minute about what they are. Who qualifies for an unsecured loan with a high principal balance and a low interest rate? Only people with good credit. In other words, the best time to apply for a debt consolidation loan is at the first sign of trouble, before you start missing payments. If you apply for a debt consolidation loan, but you get rejected because your credit score is too low, it will make your credit score even lower, creating a vicious cycle.
Work With a Debt Lawyer About Consolidating Your Debt
A South Florida debt lawyer can help you get out of debt, whether or not you qualify for a debt consolidation loan. Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.
Source:
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