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Read MoreThe dissolution of a partnership often leads to a sudden halving of household income while fixed costs (like housing) remain the same. Legal fees and the need to establish two separate households can immediately create significant debt.
Consolidation is a good option if you can qualify for a new loan (like a personal loan or balance transfer credit card) with a significantly lower interest rate than your current debts and you are committed to not accumulating new debt.
If you are facing a temporary financial hardship (job loss, medical issue), proactively contact your lenders. Many offer temporary hardship programs that may allow for reduced payments or a temporary pause without reporting you as late to the credit bureaus.
Its easy accessibility and the ability to make small minimum payments can create a false sense of affordability. This can lead to consistently carrying a high balance, which accumulates compound interest rapidly, causing debt to spiral out of control.
A balance transfer card can be useful if you have high-interest credit card debt and can qualify for a card with a low or 0% introductory APR. This allows you to save on interest and pay down principal faster, but requires discipline to pay off the balance before the promotional period ends.
