Consolidating debt tips
It’s typically a knee-jerk reaction as the debtor grasps at straws, but it doesn’t address how their lifestyle sunk them into debt.
“When I counsel someone, I encourage them to really understand the root issue of what got them there in the first place,” Bossler says.
If you don’t come to terms with what got you into debt, it could happen again.
Both Bossler and Lewis have seen it firsthand: Clients promise they won’t rack up insurmountable debt again, but within a few years they’ve returned to their old ways.
It may also offer a low interest rate for a promotional period but then the rate spikes. “A lot of people treat the minimum payment as an installment payment,” warns Nitsche.
You can run into trouble if you don’t understand the terms of a deal before agreeing to it.Tack a line of credit, car loan or student debt onto your string of credit card bills, and you can see why debt consolidation looks like a viable resolution.“Somebody who considers [consolidation] is in over their head, reaching their limits on their credit cards and they’re experiencing financial hardship,” Kathryn Bossler, a financial counselor at Green Path Debt Solutions, says.But if you aren’t savvy when combining your debts, you could be worse off.