Debt Consolidation is a great way to get rid of your credit card debt, but it does come with risks. While consolidating your debt can give you a single monthly payment at a lower interest rate.
Risk #1 – Paying More Credit Over Time
When you combine all of your debts into one large loan or transfer balance, you may end up paying more total interest over time than if you had kept each account open in its original form. It’s important to keep in mind that this increased interest rate is not only a result of being able to repay your debt much faster, but it can also be a factor when deciding how long you will pay off your consolidated balance.
Risk #2 – Paying High Fees For The Personal Loan
One of the biggest dangers is that you may end up paying high fees for the Personal Loan. This can add hundreds or even thousands of dollars to your total bill, which may not be worth it in the long run. Be sure to shop around and compare interest rates before you commit to any loan. Otherwise, you may find yourself in a worse financial situation than you were before.
Risk #3 – Loss Of Collateral
When you take out a loan to consolidate your debts, you are putting your assets at risk. If you cannot make your payments, the lender can seize your collateral to repay the debt. This could include your home, car, or other possessions. You should be sure that you can afford the new monthly payment before consolidating your debts.
Risk #4 – High Credit Utilization
If you transfer all your Credit Card balances onto one low-interest rate card, then this can help improve your cash flow but could also cause problems for you in the future if not managed properly. You may find yourself with high-interest rates due to having too much outstanding debt which means paying more money each month just servicing the cost of borrowing!
Risk #5 – Getting Deeper Into Debt
When you consolidate your debts, you may be tempted to take on new debt to get a lower interest rate. This can put you in a worse financial situation and make it harder to pay off your debts. Another risk of debt consolidation is that you may not be able to keep up with the payments. If you miss even one payment, you could end up damaging your credit score and facing penalties from your creditors. And if you go too long without making any progress on paying off your debts, you could find yourself in even more trouble.
Before consolidating your debt, it is important to weigh all of the Risks And Benefits involved and to know all of your options before you make that decision. Make sure to choose a reputable company that offers other alternatives like Debt Settlement as well as Legal Protection and one that has been in business for years like Encompass Recovery Group. We have helped thousands of clients become debt-free, and we can help you too! Contact us today at (877) 702-2454 for a free consultation.
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