As mortgage maestros, there’s one mistake we see all the time with borrowers:
They take out loans to cover pre-existing debt.
You should avoid this at all costs.
Why?
There are two main risks:
First, you don’t actually address the underlying issue that got you into debt to begin with.
Perhaps it was job loss, reduced income, or even overspending.
When you avoid identifying the problem, you might set yourself up for a ton of additional future debt, and far fewer options to deal with it.
Second, you might hurt your credit.
If you don’t take the correct steps to get your finances back on track, you risk damaging your credit.
At the end of the day, this will cause far more problems than it solves.
If you feel like it’s your only option, we strongly recommend you calculate your “debt to income ratio” first.
The calculation goes as follows:
Add up all your monthly debt payments
Divide them by your gross monthly income
If you fall above 43%, you should strongly consider finding another option.
Because when taking out a loan to pay off debt, it's never tit for tat – you’ll have to pay it back, and then some!
We hope that you found this informative, and if you’d like to learn more about debt consolidation or need some guidance on reducing your debt, just reply to this email or give us a call :)
