Debt Consolidation Is Not a Panacea
The generation that grew up playing video games on the original Nintendo game system remembers what it looked like when you were in the Tetris equivalent of checkmate. The pieces piled up on the screen, and even though you frantically rushed to line them up to clear some spaces, they eventually reached the top of the screen, and the game was over. In a game of Tetris, you can just start a new game, and you can also be proud of how many points you scored while the game was going on. Unfortunately, it does not work this way with debts. You are one of many Americans whose debts pile up to the top of the screen, that is, the bottom of your bank account, every pay period, and you can barely clear them away in time. Defaulting on a debt is not as simple as clicking “new game.” To avoid debt collection lawsuits, repossession of collateral assets, and other unpleasant consequences of unpaid debts, you must choose a solution bigger than just making minimum payments you can barely afford. Debt consolidation is often the favored solution, but it will not solve all your problems. If you are considering consolidating your debt, or if you already consolidated your debt but are still struggling financially, contact a Boca Raton debt lawyer.
If You Need to Consolidate Your Debt, You Are Probably Not Eligible for the Lowest Interest Rates
The rationale behind debt consolidation is that it enables you to pay less in interest. A debt consolidation loan is a personal loan where you immediately use the funds to pay off old debts. The old debts have higher interest rates than the debt consolidation loan, so you pay less interest over time. Credit card debts tend to have interest rates above 20 percent, but how low are the interest rates on debt consolidation loans? It depends. The better your credit score, the less interest lenders will charge you. This means that, if you need a debt consolidation loan, you probably are not eligible for the lowest rates.
Debt Consolidation Is Not a Fast Track to Debt Freedom or a High Credit Score
When you take out a new loan, your credit score gets lower. Even if you use your debt consolidation loan to pay off old debts, your credit score will suddenly get lower and gradually get higher. Furthermore, the repayment terms on debt consolidation loans tend to be long. This means that it will be a while before you pay down the loan enough for it to improve your credit score substantially.
You Can Still Spend Beyond Your Means After You Consolidate Your Debt
Debt consolidation loans are not a cure for overspending. The risk remains that you might borrow a debt consolidation loan, pay off your credit card, and then start running up your credit card balance again, faster than you pay down your debt consolidation loan.
Work With a Debt Lawyer About Consolidating Your Debt
A South Florida debt lawyer can help you decide whether to consolidate your debt. Contact Nowack & Olson, PLLC in Boca Raton, Florida to discuss your case.
Source:
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