Can Debt Consolidation be Dangerous after a Divorce?
After going through the emotional upheaval of a divorce, it’s easy to understand why you wouldn’t want to trust anything new. Divorce can be rough on your personal finances, making it imperative that you develop a strict budget and hold on to any money that you can. For many people, debt consolidation has been a huge help towards reaching their post-divorce financial goals, but it is important to understand some things about the process.
Debt consolidation allows you to take all of your post and pre-divorce debt (including joint debts that have been assigned to you by a judge), and combine them into a single loan. This loan can include credit cards, student loans, personal loans, medical debt, and even the bills from your attorney. Immediately after taking out the loan, all of these debts are paid in full. Each creditor will mark the account as completely paid off, leaving you with only one single loan to pay off each month.
Because all of the debts are immediately paid off, it’s important to make sure that you include only debts that you want to pay on your own. Your ex-spouse’s name will come off of every loan, and the money owed will be your responsibility. Of course, many people find this to be a relief; they are no longer tied to their ex-spouse’s finances after they put joint debts through the debt consolidation process. Rather than waiting on an unreliable ex-husband or wife to make a payment, it’s possible to take them out of the process entirely.
All of your former debt will be combined into a single loan, so it is important to choose the terms of the loan very carefully. This is where some recent divorcees get in trouble with debt consolidation. Your debt counselor can help you to choose the right loan, but only if you are honest with him or her about what your goals are.
<p data-sp-element=”content”>For example, if you’re having trouble paying your bills every month, you need to find a loan with the lowest monthly payment possible. This loan will have a lower interest rate than what you’re currently paying, and it will also stretch out the payments over more time so that the minimum payment will drop to less than held of what you’re currently paying. That will give you the ability to get on your feet, get your credit in order, and develop a reasonable budget.