A Guide To Debt Consolidation

Due to the dire economy that has affected just about every country globally in recent years, many people are finding themselves with debts that they are struggling to pay off. A typical scenario might involve a family with a monthly mortgage, a car repayment, credit card debt, and a few store cards to boot. In many cases, consumers are only able to pay the minimum monthly amount on credit cards and other high-interest debts, which results in the debt never really decreasing.

There are several things you should do in order to get your debts to a controllable level as well as considering debt consolidation.

Firstly, if you have any savings at all, use them to get your high-interest debts down by making a one-off payment to your creditors. Take a look at your assets – maybe you have things that you do not really need that could be sold to help lower your debts.

Once you have got your debts as low as possible, it’s time to look at debt consolidation. Debt consolidation is the term given for bringing all your debts together into one single loan which you pay off on a monthly basis. Refinancing existing debts in this way often means you can lower the rate of interest on the original debt, but this is not always the case. So you need to make sure you will not end up paying a lot more interest in the long run. However, having said that, in many scenarios, even if you do end up paying more interest, as long as your monthly payments are lower and more manageable it is probably a fair trade. Even if you pay more interest, keeping your roof over your head or your car in your garage will probably be more important. For more info and help with controlling debt, see here.

Benefits Of Debt Consolidation

The benefit of having one fixed monthly repayment is your finances will be much easier to manage. When setting up your consolidation loan, make sure you agree with the lender an amount you can comfortably afford – you do not want to find that in a few months you are in the same boat and struggling every month.

Plan A Budget

Before applying for a debt consolidation loan is a good idea to use a budget planner. This will help you see exactly where your money is going every month and how much you can afford to pay off with your debt consolidation loan.

Caution

When applying for a loan for consolidation purposes only ask for what you actually need. If you have been short of money for a while it is tempting to ask for a little extra to treat the family, or buy yourself a few things you have done without in recent times. However, at this time adding to your debt is not a good idea, so avoid the temptation of unnecessary borrowing.


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