Debt Consolidation - Mistakes You Should Not Make

Debt consolidation is a great way to get a good grip on your debt and start on the path of becoming debt free. Consolidating your debt brings simplicity into your finances by combining all your debts into one convenient monthly payment. Gone is the confusion of trying to keep up with the details of each of your creditors’ accounts. However, to really get the best out of debt consolidation, the following are the most important mistakes you should not make.

1. Don't leave everything in the hands of the debt consolidation agency. For you to effectively deal with your debt, you have to be involved with the process. Don't just sign up with the first agency that you come across. Do some basic research to find out the reputation pf the agency before giving them your business. Don't make the mistake of picking a bad company that can put you in more money trouble. Negotiate debt payment terms with your creditors. Most of them are always willing and will prefer to deal directly with the consumer.

2. Don’t make the mistake of using your home as collateral. Secured debt comes with the advantage of lower interest rates. The risk though, is on what you stand to lose if you miss payments. I will advice that instead of your house, consider using your car, stocks etc to secure your debt consolidation loans. Even if you do lose those things, you will still have a roof over your head.

3. Don't make the mistake of not changing your lifestyle. What got you into debt in the first place is your financial lifestyle.  If you continue living the way you have been, with the same financial mentality. You will soon be back where you started with even bigger debt problems. You have to acquire better budgeting skills. Learn to exercise more restraint in financial issues. Changing your buying habits and one or two social associates will also help you to be better off with personal financial management.

4. Don't make the mistake off missed payments. Your debt problem is not over until you have made the last payment. If you default at any point, you can scuttle the whole process and mess up your credit record. Agree to only monthly payments that you can meet up with. Make sure you understand every line of the debt consolidation agreement before you sign. Know the consequences of every statement.