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Debt Consolidation loans are tricky in any financial environment and especially when things start going bad. Environment that we’re in as we enter 2023 is a tight housing market and falling equity nationally. There was a significant run up in housing prices nationally during the Covid-19 shutdowns.

This was due, in large part, to increasing demand from people, looking to settle in the suburbs, and just generally rethinking their approach to life and work and balance.

There is still lots of extra cash, injected into the economy by the US federal government BUT interest rates have jumped as the Federal Reserve made aggressive interest rate increases.

With these interest rate increases, came credit card interest rate increases on those with variable APRs .If you need to consolidate your debt, now could be a good time to reduce your exposure and get rid of some of those higher interest rate cards or loans you may have.

The problem is not to screw up. It can be easy to do if you continue to make purchases on credit cards that you are consolidating. If you’re transferring debt to one monthly payment, make sure to put those cards away or destroy them. The entire purpose of debt consolidation is to lower your monthly outflow of funds and to keep your lines of credit under control. If you continue to make purchases, you will just be adding to the debt that you are trying to consolidate. At this point, it would be impossible to catch up.

You will need to keep your spending habits under control as well. It may feel good to you that you are consolidating your debt and that you are in a program.Looking a few years down the road, you will see that these payments will come to an end and that you have managed to clear out a considerable amount of debt. If you continue to spend, however, that day may never come. Going out to dinner repeatedly, movies, concerts, trips, etc. will never get you out of debt. Along with a debt consolidation loan, you will need to put together a spending plan so you don’t fall into this very easy trap. No one is telling you not to have a good time and be miserable, but you need to remember what got you here in the first place.

Remember to keep your debts in good standing and pay them monthly. If you start missing payments, or make late payments, your credit score will suffer. Once your credit score drops, it will be much more difficult to get a reasonable interest rate on a debt consolidation loan.Any type of large purchase like a home or a car will also be tougher with a lower credit score. Try to stay timely and on time with your monthly payments.

Use the following Amortization Calculator to calculate the periodic payments that are required to pay off a loan, such as a mortgage or car loan.