Before you sign on the dotted line, be sure you understand yourself and how you got in this situation in the first place. The major disadvantage of a debt consolidation loan is that if you lack self-discipline or think the debt problem is resolved, you may set yourself up for major financial problems in the future.
Debt consolidation can pave the way for continued poor spending habits. If you dump your hard won equity into a financial initiative to pay off your bills quickly, you may end up with a longer mortgage term (reduced lifetime savings) as well as a still as yet unbalanced budget.
In addition, debt consolidation doesn’t always work as planned. If you get involved with a small lender who goes out of business or passes your loan along to a less than scrupulous third party, you could find yourself in legal and financial deep water.
Some loans may also require a co-signer. The risk to a co-signer is that if you default, they are liable. This can cause huge problems in a family, and it´s a sure way to lose friends. For instance, if you only have a few credit cards, it may make more sense to move all or most of your debt over to your lowest rate card than to go through the whole song and dance of taking out an independent debt consolidation agreement.
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Tags: Credit Card, Debt Consolidation, Disadvantages, disipline, loan
July 3rd, 2009 at 2:43 pm
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