Are you caught up with overwhelming debts that you can no longer afford even your monthly utility bills? Wish you could regain control over your financial situation? In such a situation, debt consolidation might serve you best. This article provides you with some tips that can help you get back on your feet pretty soon by applying for debt consolidation. Debt consolidation is a tool that can unburden you from hefty debts, enable you to obtain complete financial freedom, and lighten up your future plans.
Getting Out of Trouble
Debt consolidation is basically a way to get rid of or eliminate all your existing debts by combining them into a single debt. This single, new debt usually carries a low rate of interest when compared to that of all the debts individually. Consolidating your debts helps in a way that you will no longer have to make different monthly payments to different loans for people with bad credit lenders; instead, all you need to do is take out a new loan that will have you pay back only one debt with low interest rate, making your loan payments easier and more affordable.
Steps to Easy Debt Consolidation
Step 1: Determine your load of debt
In this step, you will have to determine which of your debts are good. For instance, if you possess a mortgage loan that accounts to less that 25 percent of your earnings, then you can consider it as a good debt. Then, you should calculate the overall amount of money you owe as debts to creditors and family, the debt that carries the highest interest rate, and the total amount you pay as interest for the debts.
Step 2: Frame a budget
You should determine the amount of money you really need for paying your utility bills, savings, entertainment, and to make your debt payments. This will help you identify those expenses that are not really a need and hence to cut them out.
Step 3: Take out a consolidation loan
In order to take out a debt consolidation loan, first meet up with a financial advisor who represents any bank of your choice. In most cases, the bank in which you hold a savings account or the one that has issued you a loan previously will offer you the best rates. Remember to be accurate with the documentation you submit for taking out the unsecured personal loans. Some of the most common documents you would be expected to produce include a proof of your income, last three months’ bank statements, letters from repayment agencies or creditors, etc.
Step 4: Pay your debt off
The order of debts that get paid off will usually be decided by your lender. If you are offered the opportunity to choose this, then you should choose to first pay off the debt that carries the highest interest rate.
Step 5: String along with the plan
Debt consolidation will end up successful only if you do not go back to overspending once you pay off your debts. When you have paid off a particular set of your debts, immediately move on to paying off the next, if any. When you become debt free, start saving or investing money.