Why Renters Shouldn't Reconsolidate Their Debt

Like most Americans, we have bills to pay and balance loans to meet. With debts coming in from almost every direction, consolidation of those debts may appear to be a smart move. It's looked at as one payment instead of several, and even perhaps get yourself a better deal. This works for some of us, but not all.

It typically doesn't work for those who rent. If a renter wishes to consolidate their debt, a lender will group your debts into one pile and now you owe them, instead of multiple different companies. Here's why it's a bad idea.

1. Consolidating debt affects your credit score

Let me guess, you're renting now to save up for a down payment on a house soon. Oh, and you'll also need a new car in the future, and you plan on going back to school. 

Getting a debt consolidation loan will show a huge red flag on your credit report, which also takes two years to be removed. This will hurt your credit score, and that's a fact. That will probably push your future plans of getting a house and a new car back a ways. 

Having a less than desirable credit score will impact your interest-rate's, potentially costing you way more than you originally planned. 

2. Consolidation can be expensive

While it seems like a great idea to have one payment instead of me, it will do you no good if you can't make the payments. Missing payments can increase your interest rate, as well as incur additional fees. 

Renting is a different game. Landlords and lenders sometimes are very unforgiving. Don't put yourself in the position to have to choose which payments will be made this both. Missing either one can be costly.

3. Consolidation isn't going to help your bad financial habits. 

Be honest with yourself and acknowledge a spending problem if you truly have one. Yes, consolidation makes managing your gets easier, but it may not help you climb out of the hole you're in.

Renters usually have more flexibility with their money than homeowners, but if you've got poor monetary habits you will find yourself strapped as well. 

Renters insurance is also cheaper than homeowners insurance, so renters aren't worried about extra costs like yard maintenance, property taxes, etc. with this in mind, renters sometimes forget they need a rainy-day fund. 

Everyone needs a rainy day fund. They should also monitor their spending, know where every dollar goes, and have a savings they contribute to monthly. Before handing over all your debts to a lender, make sure you can manage your own money first.

Create some good financial habits so you don't find yourself clawing out of a hole. In the end, make sure you have your life in order before you consolidate your debts. Doing this first will make the process much smoother. 

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