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That Time When Debt Consolidation Cannot Be a Good Idea!

You may have dues on various credit cards and other emergency cards. Some cards may be used for emergency purposes like your medical cards and some of them may be used for your next shopping. Besides the cards, you may have some pending bills like your phone, electric, internet or gas bill, your mortgage or your car EMI payment etc. There may be cases where you can find debt consolidation as an attractive option to pay your bills by reducing the number of payments per month. But there can also be some scenarios where debt consolidation will not work properly. Let us go through a few of the cases where debt consolidation cannot be a very good idea!!

Never Changing Habits: Some people fail to change their spending habits. Debt consolidation can only act as breather if you have a proper control over your budget. It is not a one-stop solution for all your financial worries. Debt consolidation will not work if you possess a bad spending habit and have issues in maintaining a proper financial budget.

Your House Is in Danger: Consolidation can be considered in situations where you require re-financing for your home. But when you are putting your unsecured debt into your secured one, then debt consolidation cannot be useful. If you have uncontrolled credit card payments, dues, consolidation may help you out in dealing with a single consolidated payment each month. But, you should always be aware that if card payments turn into default, you could even be sued by the authority.

Credit Score: When you are concerned about impact on your credit score, then consolidation cannot be a good idea. It will definitely create a negative impact on your score. As your accounts’ age is being considered, older accounts will have, more credit worthiness. But when you opt for consolidation, all other accounts are closed to form a new account. If you possess a good credit score, then considering debt consolidation will not be helpful. You must check various debt consolidation reviews before taking final decision.

Payment in a Hurry: There may be cases when you need to make payment very fast in order to save a few bucks. There may be an introductory price announced in the market for the products you want to buy or there may be penalties for late payments. Consolidation cannot operate in this case where the time period for payment is very short.

Debt Consolidation vs Debt Settlement: You should always compare consolidation with settlement when you have huge debts in queue. A debt settlement company will definitely review your financial position and will create a fixed amount which has to be paid every month. Your credit score can get a negative impact and your accounts may eventually get charged off. The company may negotiate on your behalf and pay a portion of what is actually owed. Finally, your account will be settled, but as a result you have to face a negative impact that lasts up to 7 years after settlement.

Sometimes debt consolidation can be costlier than debt settlement. You are required to understand your situation properly and then work out your debts accordingly. If you are still confused, you may seek professional advice from debt experts. Your main aim should be to pay off debts as soon as possible and if you start paying early, you can avoid many financial issues. Debt consolidation can only be helpful under a controlled budget and a not-so-good credit score situation.

Author Bio: Stephen George is a well known debt analyst and a blogger. In this article, he is making you aware about all the situations where debt consolidation will not work properly.