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There are many different debt consolidators as well as debt consolidation out there both claiming to help you to wipe off your debts in quick time. Few of them will provide assistance and guidance only while there may be a few that will also offer you a loan with which you can combine all of your credit card debts as well as other bills into one single loan and one monthly payment.
Well, few of these programs are reputable and trustworthy but all may not be so. Therefore, you will need to be cautious while signing up for any such programs. This will enable you to deal with your debts effectively and also stay safe. Remember, there are lots of financial implications when it comes to money or debt management. Add to that, it will also require paying high fees and exorbitant rates of interest.
When you choose the right debt consolidator then the organization will set up a specific debt reduction strategy as per your requirement. However, you may still have it done without paying someone else to help you if you are confident enough to do it all by you. On the other hand, if you are the type of person who has this tendency of not following through the tasks, you will be better off when you take help from a professional.
Things to do
No matter whichever move you choose to make, there are a few things that you will need to do.
First, you will have to consider the features and factors of every debt consolidation program since there are a lot of different options to choose from. The different types of debt consolidation programs are as follows:
- Homeowners may use the equity of their home to qualify to take on a debt consolidation
- Those who do not have a home or have no equity on their home can opt for an unsecured debt consolidation loan from a financial organization or online and
- Credit card holders can take advantage of it to take out a new credit card at a lower rate of interest and transfer the existing balances of the old credit cards to it.
No matter whatever option you choose, it is paramount that you do not incur more debts after taking out the loan or transferring the old credit card balances. You may also look up at different sites such as Nationaldebtreliefprograms.com/to more about the options and its different types, its features and the consequences of missing out on a debt payment.
Second, you will have to set up the stage and prepare yourself properly to choose the right type of debt consolidation loan that you wish to take out. For this you will need to do the following:
- Segregate all your loan accounts with different due dates
- Set up an e-mail reminder and
- Set up automatic payments for your debt.
These steps will ensure that you do not miss out on your monthly payments ever. Remember, a debt consolidation loan can provide you with the best debt relief but it can only do that if you are dedicated towards its management as well as paying off your debt. You should never carry any balances making lower than the required payments every month. This will result in more interest accrued leading you to the same old situation once again.
Third, before seeking a debt consolidation loan for your debt solution consider your credit standing which is the most important parameter for any lender to adjudge whether an applicant is reliable and worthy enough to grant a loan of any type.
- If your credit score is lower you can expect a higher cost of debt consolidation.
- As for those people who have bad credit it might be hard for them to even qualify to get a loan or new credit card and their application will get rejected.
The order and condition of your credit report and score will determine which debt consolidation loan options are available.
- Fourth, find out the actual amount that you owe to your creditors. This is important because you may get an unsecured debt consolidation loan if this outstanding debt amount is low. An unsecured loan will come with a higher cost than a secured home equity loan but will not have the risk of losing your home in case you fail to repay.
- Fifth, if you find that it is hard for you to qualify for the loan amount you require for consolidating your debt given all the above factors, you should seek help from a credit counseling agency to manage your debts.
- Sixth, you must know your expectations well and the exact ways in which you will want the debt consolidation program to work. Sometimes, reducing high finance fees, rates of interest and other charges may help you to repay debts faster.
Budgeting is another important factor to consider if you want to make the best use of a debt consolidation program. If you are not very proactive and deficient in it, then taking help of a professional credit counseling service or any other financial consultant will help you a lot in proper budgeting as well as managing your credit.
When you make a monthly budget you follow the steps as under:
- First, find out and enlist all your income sources. It must include your salary as well as any other receipts from rents, investments, and shares. You must also include any major inheritance or maturity of any fixed deposits as well.
- Next, you must consider all your areas of expenses. It should include your monthly utility bills, cables and groceries, transportation and insurance premiums, education and all other household expenses. You may even include the amount to save every month to create an emergency fund. Exclude all expenses that you can do without till your pay off your debts successfully.
Lastly, you will have to assess your spending habits honestly and make sure that you make proper and necessary amendments in it to ensure that taking on a debt consolidation loan will really mend your situation.
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