Debt consolidation involves consolidating your debts into one payment, usually with a consolidation loan. Not only does this simplify your debt, but if you qualify for a rate low enough, you can pay less interest and even get out of debt faster.

Sounds like a no-brainer, right?

While financial experts agree that debt consolidation can be a smart move, it is not without risk. Avoid these four common mistakes when consolidating.

Being in debt is stressful, and it makes sense to want to get out of it as quickly as possible. But rushing into consolidation can cost you money.

Borrowers with higher credit scores tend to benefit from lower interest rates, including when refinancing. That’s why Charles Ho, a California-based certified financial planner and founder of Legacy Builders Financial, says borrowers should look for ways to build credit before consolidating.

When working with clients who want to consolidate, Ho pulls their credit report and identifies what he calls “fruits at hand”: quick fixes with big payoffs. This could be disputing an error or scheduling a few payments on time to reduce credit usage i.e. the amount you owe on revolving credit accounts versus the total credit available from those. accounts.